Correlation Between Axalta Coating and Skyworks Solutions

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

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

Diversification Opportunities for Axalta Coating and Skyworks Solutions

-0.56

Correlation Coefficient

Axalta Coating  Skyworks Solutions

Excellent diversification

The 3 months correlation between Axalta and Skyworks is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Skyworks Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyworks Solutions and Axalta Coating 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 Axalta Coating Systems are associated (or correlated) with Skyworks Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyworks Solutions has no effect on the direction of Axalta Coating i.e., Axalta Coating and Skyworks Solutions go up and down completely randomly.

Pair Corralation between Axalta Coating and Skyworks Solutions

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 0.66 times more return on investment than Skyworks Solutions. However, Axalta Coating Systems is 1.53 times less risky than Skyworks Solutions. It trades about 0.1 of its potential returns per unit of risk. Skyworks Solutions is currently generating about -0.03 per unit of risk. If you would invest  3,228  in Axalta Coating Systems on March 5, 2024 and sell it today you would earn a total of  331.00  from holding Axalta Coating Systems or generate 10.25% return on investment over 90 days.

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

Axalta Coating Systems  vs.  Skyworks Solutions

Axalta Coating Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Axalta Coating may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Skyworks Solutions is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Axalta Coating and Skyworks Solutions

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

The idea behind Axalta Coating Systems and Skyworks Solutions 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.