Correlation Between AGC and Evonik Industries

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

Diversification Opportunities for AGC and Evonik Industries

0.24

Correlation Coefficient

AGC  Evonik Industries

Modest diversification

The 3 months correlation between AGC and Evonik is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding AGC Inc ADR and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries 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 Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of AGC i.e., AGC and Evonik Industries go up and down completely randomly.

Pair Corralation between AGC and Evonik Industries

Assuming the 90 days horizon AGC Inc ADR is expected to under-perform the Evonik Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, AGC Inc ADR is 2.8 times less risky than Evonik Industries. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Evonik Industries AG is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,130  in Evonik Industries AG on October 12, 2024 and sell it today you would lose (380.00) from holding Evonik Industries AG or give up 17.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.26%
Values	Daily Returns

AGC Inc ADR  vs.  Evonik Industries 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.

Evonik Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evonik Industries AG 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 forward 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 AGC and Evonik Industries

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

The idea behind AGC Inc ADR and Evonik Industries 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.