Correlation Between Axalta Coating and Launch One

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

Diversification Opportunities for Axalta Coating and Launch One

-0.1

Correlation Coefficient

Axalta Coating  Launch One

Good diversification

The 3 months correlation between Axalta and Launch is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Launch One Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Launch One Acquisition 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 Launch One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Launch One Acquisition has no effect on the direction of Axalta Coating i.e., Axalta Coating and Launch One go up and down completely randomly.

Pair Corralation between Axalta Coating and Launch One

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 22.02 times more return on investment than Launch One. However, Axalta Coating is 22.02 times more volatile than Launch One Acquisition. It trades about 0.04 of its potential returns per unit of risk. Launch One Acquisition is currently generating about 0.11 per unit of risk. If you would invest  2,706  in Axalta Coating Systems on October 9, 2024 and sell it today you would earn a total of  751.00  from holding Axalta Coating Systems or generate 27.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.54%
Values	Daily Returns

Axalta Coating Systems  vs.  Launch One Acquisition

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.

Launch One Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Launch One is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Axalta Coating and Launch One

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

The idea behind Axalta Coating Systems and Launch One Acquisition 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 CEOs Directory module to screen CEOs from public companies around the world.