Correlation Between Axalta Coating and Cedar Realty

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

Diversification Opportunities for Axalta Coating and Cedar Realty

0.63

Correlation Coefficient

Axalta Coating  Cedar Realty

Poor diversification

The 3 months correlation between Axalta and Cedar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Cedar Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cedar Realty Trust 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 Cedar Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cedar Realty Trust has no effect on the direction of Axalta Coating i.e., Axalta Coating and Cedar Realty go up and down completely randomly.

Pair Corralation between Axalta Coating and Cedar Realty

Given the investment horizon of 90 days Axalta Coating is expected to generate 17.18 times less return on investment than Cedar Realty. But when comparing it to its historical volatility, Axalta Coating Systems is 1.74 times less risky than Cedar Realty. It trades about 0.01 of its potential returns per unit of risk. Cedar Realty Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,271  in Cedar Realty Trust on October 4, 2024 and sell it today you would earn a total of  229.00  from holding Cedar Realty Trust or generate 18.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Axalta Coating Systems  vs.  Cedar Realty Trust

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

Cedar Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Axalta Coating and Cedar Realty

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

The idea behind Axalta Coating Systems and Cedar Realty Trust 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.