Correlation Between Akzo Nobel and Incitec Pivot

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

Diversification Opportunities for Akzo Nobel and Incitec Pivot

0.31

Correlation Coefficient

Akzo Nobel  Incitec Pivot

Weak diversification

The 3 months correlation between Akzo and Incitec is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot 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 Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and Incitec Pivot go up and down completely randomly.

Pair Corralation between Akzo Nobel and Incitec Pivot

Assuming the 90 days horizon Akzo Nobel is expected to generate 1.98 times less return on investment than Incitec Pivot. But when comparing it to its historical volatility, Akzo Nobel NV is 4.87 times less risky than Incitec Pivot. It trades about 0.19 of its potential returns per unit of risk. Incitec Pivot Ltd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Incitec Pivot Ltd on October 24, 2024 and sell it today you would earn a total of  11.00  from holding Incitec Pivot Ltd or generate 5.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Akzo Nobel NV  vs.  Incitec Pivot Ltd

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Incitec Pivot

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Incitec Pivot 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 Incitec Pivot

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

The idea behind Akzo Nobel NV and Incitec Pivot Ltd 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.