Correlation Between Aterian and Axalta Coating

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

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

Diversification Opportunities for Aterian and Axalta Coating

0.26

Correlation Coefficient

Aterian  Axalta Coating

Modest diversification

The 3 months correlation between Aterian and Axalta is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aterian 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 Aterian 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 Aterian 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 Aterian i.e., Aterian and Axalta Coating go up and down completely randomly.

Pair Corralation between Aterian and Axalta Coating

Given the investment horizon of 90 days Aterian is expected to under-perform the Axalta Coating. In addition to that, Aterian is 1.84 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 -0.06 per unit of volatility. If you would invest  3,677  in Axalta Coating Systems on October 15, 2024 and sell it today you would lose (254.00) from holding Axalta Coating Systems or give up 6.91% of portfolio value over 90 days.

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

Aterian  vs.  Axalta Coating Systems

Aterian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Aterian and Axalta Coating

The main advantage of trading using opposite Aterian and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aterian 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 Aterian 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.