Correlation Between Axalta Coating and BANCO

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

Diversification Opportunities for Axalta Coating and BANCO

0.2

Correlation Coefficient

Axalta Coating  BANCO

Modest diversification

The 3 months correlation between Axalta and BANCO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and BANCO SANTANDER S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER S 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER S has no effect on the direction of Axalta Coating i.e., Axalta Coating and BANCO go up and down completely randomly.

Pair Corralation between Axalta Coating and BANCO

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 3.8 times more return on investment than BANCO. However, Axalta Coating is 3.8 times more volatile than BANCO SANTANDER S. It trades about 0.04 of its potential returns per unit of risk. BANCO SANTANDER S is currently generating about 0.01 per unit of risk. If you would invest  3,522  in Axalta Coating Systems on October 25, 2024 and sell it today you would earn a total of  132.00  from holding Axalta Coating Systems or generate 3.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Axalta Coating Systems  vs.  BANCO SANTANDER S

Axalta Coating Systems

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 3 (%) 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.

BANCO SANTANDER S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANCO SANTANDER S has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BANCO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Axalta Coating and BANCO

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

The idea behind Axalta Coating Systems and BANCO SANTANDER S 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.