Correlation Between Axalta Coating and OCCIDENTAL

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

Diversification Opportunities for Axalta Coating and OCCIDENTAL

0.44

Correlation Coefficient

Axalta Coating  OCCIDENTAL

Very weak diversification

The 3 months correlation between Axalta and OCCIDENTAL is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and OCCIDENTAL PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCCIDENTAL PETE P 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 OCCIDENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCCIDENTAL PETE P has no effect on the direction of Axalta Coating i.e., Axalta Coating and OCCIDENTAL go up and down completely randomly.

Pair Corralation between Axalta Coating and OCCIDENTAL

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the OCCIDENTAL. In addition to that, Axalta Coating is 1.88 times more volatile than OCCIDENTAL PETE P. It trades about -0.14 of its total potential returns per unit of risk. OCCIDENTAL PETE P is currently generating about -0.08 per unit of volatility. If you would invest  7,575  in OCCIDENTAL PETE P on December 4, 2024 and sell it today you would lose (230.00) from holding OCCIDENTAL PETE P or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.33%
Values	Daily Returns

Axalta Coating Systems  vs.  OCCIDENTAL PETE P

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

OCCIDENTAL PETE P

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Axalta Coating Systems and OCCIDENTAL PETE P 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.