Correlation Between Axalta Coating and Gulf Resources

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

Diversification Opportunities for Axalta Coating and Gulf Resources

-0.56

Correlation Coefficient

Axalta Coating  Gulf Resources

Excellent diversification

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

Pair Corralation between Axalta Coating and Gulf Resources

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the Gulf Resources. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 3.73 times less risky than Gulf Resources. The stock trades about -0.57 of its potential returns per unit of risk. The Gulf Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Gulf Resources on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Gulf Resources or generate 0.0% 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.  Gulf Resources

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.

Gulf Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gulf Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Axalta Coating and Gulf Resources

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

The idea behind Axalta Coating Systems and Gulf Resources 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.