Correlation Between Signify NV and Akzo Nobel

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

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

Diversification Opportunities for Signify NV and Akzo Nobel

0.32

Correlation Coefficient

Signify NV  Akzo Nobel

Weak diversification

The 3 months correlation between Signify and Akzo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Signify NV 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 Signify NV 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 Signify NV 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 Signify NV i.e., Signify NV and Akzo Nobel go up and down completely randomly.

Pair Corralation between Signify NV and Akzo Nobel

Assuming the 90 days trading horizon Signify NV is expected to under-perform the Akzo Nobel. In addition to that, Signify NV is 1.51 times more volatile than Akzo Nobel NV. It trades about -0.08 of its total potential returns per unit of risk. Akzo Nobel NV is currently generating about 0.12 per unit of volatility. If you would invest  5,630  in Akzo Nobel NV on September 18, 2024 and sell it today you would earn a total of  178.00  from holding Akzo Nobel NV or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Signify NV  vs.  Akzo Nobel NV

Signify NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Signify NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Signify NV is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Akzo Nobel NV

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Akzo Nobel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Signify NV and Akzo Nobel

The main advantage of trading using opposite Signify NV and Akzo Nobel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signify NV 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 Signify NV 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.