Correlation Between Axalta Coating and Townsquare Media

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

Diversification Opportunities for Axalta Coating and Townsquare Media

0.49

Correlation Coefficient

Axalta Coating  Townsquare Media

Very weak diversification

The 3 months correlation between Axalta and Townsquare is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Axalta Coating i.e., Axalta Coating and Townsquare Media go up and down completely randomly.

Pair Corralation between Axalta Coating and Townsquare Media

Given the investment horizon of 90 days Axalta Coating is expected to generate 1.74 times less return on investment than Townsquare Media. But when comparing it to its historical volatility, Axalta Coating Systems is 1.6 times less risky than Townsquare Media. It trades about 0.04 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  667.00  in Townsquare Media on October 11, 2024 and sell it today you would earn a total of  266.00  from holding Townsquare Media or generate 39.88% return on investment over 90 days.

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

Axalta Coating Systems  vs.  Townsquare Media

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.

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Axalta Coating and Townsquare Media

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

The idea behind Axalta Coating Systems and Townsquare Media 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.