Correlation Between AGC and Covestro

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

By analyzing existing cross correlation between AGC Inc ADR and Covestro AG, you can compare the effects of market volatilities on AGC 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 AGC with a short position of Covestro. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGC and Covestro.

Diversification Opportunities for AGC and Covestro

0.48

Correlation Coefficient

AGC  Covestro

Very weak diversification

The 3 months correlation between AGC and Covestro is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding AGC Inc ADR and Covestro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro AG and AGC 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 AGC Inc ADR 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 AGC i.e., AGC and Covestro go up and down completely randomly.

Pair Corralation between AGC and Covestro

Assuming the 90 days horizon AGC Inc ADR is expected to under-perform the Covestro. In addition to that, AGC is 1.13 times more volatile than Covestro AG. It trades about -0.01 of its total potential returns per unit of risk. Covestro AG is currently generating about 0.04 per unit of volatility. If you would invest  4,620  in Covestro AG on October 12, 2024 and sell it today you would earn a total of  1,479  from holding Covestro AG or generate 32.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

AGC Inc ADR  vs.  Covestro AG

AGC Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGC Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 AGC and Covestro

The main advantage of trading using opposite AGC and Covestro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGC 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 AGC Inc ADR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.