Correlation Between Axalta Coating and Air Lease

Can any of the company-specific risk be diversified away by investing in both Axalta Coating and Air Lease 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 Air Lease 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 Air Lease, you can compare the effects of market volatilities on Axalta Coating and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and Air Lease.

Diversification Opportunities for Axalta Coating and Air Lease

0.51

Correlation Coefficient

Axalta Coating  Air Lease

Very weak diversification

The 3 months correlation between Axalta and Air is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Axalta Coating i.e., Axalta Coating and Air Lease go up and down completely randomly.

Pair Corralation between Axalta Coating and Air Lease

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the Air Lease. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 1.02 times less risky than Air Lease. The stock trades about -0.63 of its potential returns per unit of risk. The Air Lease is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  5,038  in Air Lease on October 6, 2024 and sell it today you would lose (260.00) from holding Air Lease or give up 5.16% of portfolio value over 90 days.

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

Axalta Coating Systems  vs.  Air Lease

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Air Lease

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Axalta Coating and Air Lease

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

The idea behind Axalta Coating Systems and Air Lease 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.