Correlation Between Arkema SA and Akzo Nobel

Can any of the company-specific risk be diversified away by investing in both Arkema SA and Akzo Nobel 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 Arkema SA and Akzo Nobel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arkema SA and Akzo Nobel NV, you can compare the effects of market volatilities on Arkema SA and Akzo Nobel 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 Arkema SA with a short position of Akzo Nobel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arkema SA and Akzo Nobel.

Diversification Opportunities for Arkema SA and Akzo Nobel

-0.67

Correlation Coefficient

Arkema SA  Akzo Nobel

Excellent diversification

The 3 months correlation between Arkema and Akzo is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Arkema SA and Akzo Nobel NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akzo Nobel NV and Arkema SA 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 Arkema SA are associated (or correlated) with Akzo Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akzo Nobel NV has no effect on the direction of Arkema SA i.e., Arkema SA and Akzo Nobel go up and down completely randomly.

Pair Corralation between Arkema SA and Akzo Nobel

Assuming the 90 days horizon Arkema SA is expected to under-perform the Akzo Nobel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arkema SA is 4.03 times less risky than Akzo Nobel. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Akzo Nobel NV is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,837  in Akzo Nobel NV on September 1, 2024 and sell it today you would earn a total of  63.00  from holding Akzo Nobel NV or generate 1.08% return on investment over 90 days.

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

Arkema SA  vs.  Akzo Nobel NV

Arkema SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Akzo Nobel NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akzo Nobel NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Arkema SA and Akzo Nobel

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

The idea behind Arkema SA and Akzo Nobel NV 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.