Correlation Between AGC and Lanxess AG

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

Diversification Opportunities for AGC and Lanxess AG

0.49

Correlation Coefficient

AGC  Lanxess AG

Very weak diversification

The 3 months correlation between AGC and Lanxess is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AGC Inc ADR and Lanxess AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanxess 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 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 AGC i.e., AGC and Lanxess AG go up and down completely randomly.

Pair Corralation between AGC and Lanxess AG

Assuming the 90 days horizon AGC is expected to generate 3.38 times less return on investment than Lanxess AG. But when comparing it to its historical volatility, AGC Inc ADR is 1.14 times less risky than Lanxess AG. It trades about 0.06 of its potential returns per unit of risk. Lanxess AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,422  in Lanxess AG on December 20, 2024 and sell it today you would earn a total of  983.00  from holding Lanxess AG or generate 40.59% return on investment over 90 days.

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

AGC Inc ADR  vs.  Lanxess AG

AGC Inc ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGC Inc ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, AGC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lanxess AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lanxess AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lanxess AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGC and Lanxess AG

The main advantage of trading using opposite AGC and Lanxess AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGC 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 AGC Inc ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.