Correlation Between Axalta Coating and SohuCom

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

Diversification Opportunities for Axalta Coating and SohuCom

0.02

Correlation Coefficient

Axalta Coating  SohuCom

Significant diversification

The 3 months correlation between Axalta and SohuCom is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom 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 SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of Axalta Coating i.e., Axalta Coating and SohuCom go up and down completely randomly.

Pair Corralation between Axalta Coating and SohuCom

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 0.71 times more return on investment than SohuCom. However, Axalta Coating Systems is 1.41 times less risky than SohuCom. It trades about 0.03 of its potential returns per unit of risk. SohuCom is currently generating about -0.01 per unit of risk. If you would invest  3,035  in Axalta Coating Systems on October 23, 2024 and sell it today you would earn a total of  648.00  from holding Axalta Coating Systems or generate 21.35% return on investment over 90 days.

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

Axalta Coating Systems  vs.  SohuCom

Axalta Coating Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 2 (%) 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.

SohuCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SohuCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Axalta Coating and SohuCom

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

The idea behind Axalta Coating Systems and SohuCom 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.