Correlation Between Axalta Coating and Penn National

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

Diversification Opportunities for Axalta Coating and Penn National

0.66

Correlation Coefficient

Axalta Coating  Penn National

Poor diversification

The 3 months correlation between Axalta and Penn is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Axalta Coating i.e., Axalta Coating and Penn National go up and down completely randomly.

Pair Corralation between Axalta Coating and Penn National

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 0.6 times more return on investment than Penn National. However, Axalta Coating Systems is 1.67 times less risky than Penn National. It trades about 0.01 of its potential returns per unit of risk. Penn National Gaming is currently generating about -0.02 per unit of risk. If you would invest  3,440  in Axalta Coating Systems on December 20, 2024 and sell it today you would earn a total of  6.00  from holding Axalta Coating Systems or generate 0.17% 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.  Penn National Gaming

Axalta Coating Systems

Risk-Adjusted Performance

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.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Penn National is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Axalta Coating and Penn National

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

The idea behind Axalta Coating Systems and Penn National Gaming 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.