Correlation Between Axalta Coating and Newpark Resources

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

Diversification Opportunities for Axalta Coating and Newpark Resources

0.63

Correlation Coefficient

Axalta Coating  Newpark Resources

Poor diversification

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

Pair Corralation between Axalta Coating and Newpark Resources

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the Newpark Resources. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 1.64 times less risky than Newpark Resources. The stock trades about -0.22 of its potential returns per unit of risk. The Newpark Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  717.00  in Newpark Resources on September 20, 2024 and sell it today you would earn a total of  45.00  from holding Newpark Resources or generate 6.28% 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.  Newpark Resources

Axalta Coating Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Newpark Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Newpark Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Axalta Coating and Newpark Resources

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

The idea behind Axalta Coating Systems and Newpark 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.