Correlation Between Akzo Nobel and Covestro

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

Diversification Opportunities for Akzo Nobel and Covestro

0.65

Correlation Coefficient

Akzo Nobel  Covestro

Poor diversification

The 3 months correlation between Akzo and Covestro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and Covestro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro AG 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 Covestro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covestro AG has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and Covestro go up and down completely randomly.

Pair Corralation between Akzo Nobel and Covestro

If you would invest  5,751  in Akzo Nobel NV on October 27, 2024 and sell it today you would earn a total of  549.00  from holding Akzo Nobel NV or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Akzo Nobel NV  vs.  Covestro AG

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Covestro AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Akzo Nobel and Covestro

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

The idea behind Akzo Nobel NV and Covestro AG 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.