Correlation Between Nike and Aegon NV
Can any of the company-specific risk be diversified away by investing in both Nike and Aegon NV at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nike and Aegon NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Aegon NV ADR, you can compare the effects of market volatilities on Nike and Aegon NV and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nike with a short position of Aegon NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Aegon NV.
Diversification Opportunities for Nike and Aegon NV
Good diversification
The 3 months correlation between Nike and Aegon is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR and Nike is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nike Inc are associated (or correlated) with Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of Nike i.e., Nike and Aegon NV go up and down completely randomly.
Pair Corralation between Nike and Aegon NV
Considering the 90-day investment horizon Nike is expected to generate 2.51 times less return on investment than Aegon NV. But when comparing it to its historical volatility, Nike Inc is 1.03 times less risky than Aegon NV. It trades about 0.03 of its potential returns per unit of risk. Aegon NV ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 632.00 in Aegon NV ADR on September 2, 2024 and sell it today you would earn a total of 17.00 from holding Aegon NV ADR or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Aegon NV ADR
Performance |
| Timeline |
| Nike Inc |
| Aegon NV ADR |
Nike and Aegon NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Aegon NV
The main advantage of trading using opposite Nike and Aegon NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Aegon NV can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aegon NV will offset losses from the drop in Aegon NV's long position.The idea behind Nike Inc and Aegon NV ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Aegon NV vs. Hartford Financial Services | Aegon NV vs. Goosehead Insurance | Aegon NV vs. International General Insurance | Aegon NV vs. Enstar Group Limited |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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