Correlation Between Axalta Coating and Tronox Holdings

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

Diversification Opportunities for Axalta Coating and Tronox Holdings

-0.36

Correlation Coefficient

Axalta Coating  Tronox Holdings

Very good diversification

The 3 months correlation between Axalta and Tronox is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Tronox Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tronox Holdings PLC 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 Tronox Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tronox Holdings PLC has no effect on the direction of Axalta Coating i.e., Axalta Coating and Tronox Holdings go up and down completely randomly.

Pair Corralation between Axalta Coating and Tronox Holdings

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the Tronox Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 1.75 times less risky than Tronox Holdings. The stock trades about -0.72 of its potential returns per unit of risk. The Tronox Holdings PLC is currently generating about -0.4 of returns per unit of risk over similar time horizon. If you would invest  1,248  in Tronox Holdings PLC on September 26, 2024 and sell it today you would lose (211.00) from holding Tronox Holdings PLC or give up 16.91% of portfolio value over 90 days.

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

Axalta Coating Systems  vs.  Tronox Holdings PLC

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Tronox Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tronox Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Axalta Coating and Tronox Holdings

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

The idea behind Axalta Coating Systems and Tronox Holdings PLC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.