Correlation Between Axalta Coating and Nasdaq

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

Diversification Opportunities for Axalta Coating and Nasdaq

0.61

Correlation Coefficient

Axalta Coating  Nasdaq

Poor diversification

The 3 months correlation between Axalta and Nasdaq is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Axalta Coating i.e., Axalta Coating and Nasdaq go up and down completely randomly.

Pair Corralation between Axalta Coating and Nasdaq

Given the investment horizon of 90 days Axalta Coating is expected to generate 20.73 times less return on investment than Nasdaq. In addition to that, Axalta Coating is 1.34 times more volatile than Nasdaq Inc. It trades about 0.01 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.17 per unit of volatility. If you would invest  6,006  in Nasdaq Inc on October 4, 2024 and sell it today you would earn a total of  1,739  from holding Nasdaq Inc or generate 28.95% return on investment over 90 days.

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

Axalta Coating Systems  vs.  Nasdaq Inc

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.

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Axalta Coating and Nasdaq

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

The idea behind Axalta Coating Systems and Nasdaq Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.