Correlation Between Alpha and Axalta Coating

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

By analyzing existing cross correlation between Alpha and Omega and Axalta Coating Systems, you can compare the effects of market volatilities on Alpha and Axalta Coating 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 Alpha with a short position of Axalta Coating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha and Axalta Coating.

Diversification Opportunities for Alpha and Axalta Coating

-0.02

Correlation Coefficient

Alpha  Axalta Coating

Good diversification

The 3 months correlation between Alpha and Axalta is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and Axalta Coating Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axalta Coating Systems and Alpha 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 Alpha and Omega are associated (or correlated) with Axalta Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axalta Coating Systems has no effect on the direction of Alpha i.e., Alpha and Axalta Coating go up and down completely randomly.

Pair Corralation between Alpha and Axalta Coating

Given the investment horizon of 90 days Alpha and Omega is expected to under-perform the Axalta Coating. In addition to that, Alpha is 2.38 times more volatile than Axalta Coating Systems. It trades about -0.1 of its total potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.03 per unit of volatility. If you would invest  3,139  in Axalta Coating Systems on January 20, 2024 and sell it today you would earn a total of  42.00  from holding Axalta Coating Systems or generate 1.34% return on investment over 90 days.

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

Alpha and Omega  vs.  Axalta Coating Systems

Alpha and Omega

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha and Omega 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 basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Axalta Coating Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axalta Coating Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Axalta Coating is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpha and Axalta Coating

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

The idea behind Alpha and Omega and Axalta Coating Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.