Correlation Between Akzo Nobel and Lanxess AG

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

Diversification Opportunities for Akzo Nobel and Lanxess AG

0.7

Correlation Coefficient

Akzo Nobel  Lanxess AG

Poor diversification

The 3 months correlation between Akzo and Lanxess is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and Lanxess AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanxess 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 Lanxess AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanxess AG has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and Lanxess AG go up and down completely randomly.

Pair Corralation between Akzo Nobel and Lanxess AG

Assuming the 90 days horizon Akzo Nobel NV is expected to generate 0.78 times more return on investment than Lanxess AG. However, Akzo Nobel NV is 1.27 times less risky than Lanxess AG. It trades about -0.02 of its potential returns per unit of risk. Lanxess AG is currently generating about -0.04 per unit of risk. If you would invest  7,384  in Akzo Nobel NV on October 10, 2024 and sell it today you would lose (1,501) from holding Akzo Nobel NV or give up 20.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.89%
Values	Daily Returns

Akzo Nobel NV  vs.  Lanxess 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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lanxess AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lanxess AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Akzo Nobel and Lanxess AG

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

The idea behind Akzo Nobel NV and Lanxess 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.