Correlation Between Axalta Coating and EQUINIX

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

Diversification Opportunities for Axalta Coating and EQUINIX

0.75

Correlation Coefficient

Axalta Coating  EQUINIX

Poor diversification

The 3 months correlation between Axalta and EQUINIX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and EQUINIX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUINIX INC 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 EQUINIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUINIX INC has no effect on the direction of Axalta Coating i.e., Axalta Coating and EQUINIX go up and down completely randomly.

Pair Corralation between Axalta Coating and EQUINIX

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the EQUINIX. In addition to that, Axalta Coating is 3.62 times more volatile than EQUINIX INC. It trades about -0.1 of its total potential returns per unit of risk. EQUINIX INC is currently generating about -0.12 per unit of volatility. If you would invest  8,713  in EQUINIX INC on November 28, 2024 and sell it today you would lose (300.00) from holding EQUINIX INC or give up 3.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Axalta Coating Systems  vs.  EQUINIX INC

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 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.

EQUINIX INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days EQUINIX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EQUINIX 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 EQUINIX

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

The idea behind Axalta Coating Systems and EQUINIX INC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.