Correlation Between Akzo Nobel and Air Products

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

Diversification Opportunities for Akzo Nobel and Air Products

0.0

Correlation Coefficient

Akzo Nobel  Air Products

Pay attention - limited upside

The 3 months correlation between Akzo and Air is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and Air Products go up and down completely randomly.

Pair Corralation between Akzo Nobel and Air Products

If you would invest  29,176  in Air Products and on December 23, 2024 and sell it today you would lose (11.00) from holding Air Products and or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Akzo Nobel NV  vs.  Air Products and

Akzo Nobel NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Akzo Nobel NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Akzo Nobel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Air Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Akzo Nobel and Air Products

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

The idea behind Akzo Nobel NV and Air Products and 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.