Correlation Between Akzo Nobel and AGC

Can any of the company-specific risk be diversified away by investing in both Akzo Nobel and AGC 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 AGC 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 AGC Inc ADR, you can compare the effects of market volatilities on Akzo Nobel and AGC 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 AGC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akzo Nobel and AGC.

Diversification Opportunities for Akzo Nobel and AGC

0.28

Correlation Coefficient

Akzo Nobel  AGC

Modest diversification

The 3 months correlation between Akzo and AGC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and AGC Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGC Inc 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 AGC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGC Inc ADR has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and AGC go up and down completely randomly.

Pair Corralation between Akzo Nobel and AGC

Assuming the 90 days horizon Akzo Nobel NV is expected to under-perform the AGC. But the otc stock apears to be less risky and, when comparing its historical volatility, Akzo Nobel NV is 1.23 times less risky than AGC. The otc stock trades about -0.33 of its potential returns per unit of risk. The AGC Inc ADR is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  647.00  in AGC Inc ADR on September 3, 2024 and sell it today you would lose (24.00) from holding AGC Inc ADR or give up 3.71% of portfolio value over 90 days.

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

Akzo Nobel NV  vs.  AGC Inc ADR

Akzo Nobel NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akzo Nobel NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Akzo Nobel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

AGC Inc ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGC Inc ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, AGC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akzo Nobel and AGC

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

The idea behind Akzo Nobel NV and AGC Inc 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.