Correlation Between Akzo Nobel and Arkema SA

Can any of the company-specific risk be diversified away by investing in both Akzo Nobel and Arkema SA 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 Akzo Nobel and Arkema SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Akzo Nobel NV and Arkema SA ADR, you can compare the effects of market volatilities on Akzo Nobel and Arkema SA 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 Akzo Nobel with a short position of Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akzo Nobel and Arkema SA.

Diversification Opportunities for Akzo Nobel and Arkema SA

0.5

Correlation Coefficient

Akzo Nobel  Arkema SA

Very weak diversification

The 3 months correlation between Akzo and Arkema is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and Arkema SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA ADR and Akzo Nobel 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 Akzo Nobel NV are associated (or correlated) with Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA ADR has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and Arkema SA go up and down completely randomly.

Pair Corralation between Akzo Nobel and Arkema SA

Assuming the 90 days horizon Akzo Nobel is expected to generate 1.16 times less return on investment than Arkema SA. But when comparing it to its historical volatility, Akzo Nobel NV is 1.01 times less risky than Arkema SA. It trades about 0.04 of its potential returns per unit of risk. Arkema SA ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,485  in Arkema SA ADR on December 28, 2024 and sell it today you would earn a total of  462.00  from holding Arkema SA ADR or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Akzo Nobel NV  vs.  Arkema SA ADR

Akzo Nobel NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Akzo Nobel NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Akzo Nobel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Arkema SA ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arkema SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Arkema SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Akzo Nobel and Arkema SA

The main advantage of trading using opposite Akzo Nobel and Arkema SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akzo Nobel position performs unexpectedly, Arkema SA 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 Arkema SA will offset losses from the drop in Arkema SA's long position.

The idea behind Akzo Nobel NV and Arkema SA 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.