Correlation Between Axalta Coating and 98385XAM8

Can any of the company-specific risk be diversified away by investing in both Axalta Coating and 98385XAM8 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 98385XAM8 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 XTO ENERGY INC, you can compare the effects of market volatilities on Axalta Coating and 98385XAM8 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 98385XAM8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and 98385XAM8.

Diversification Opportunities for Axalta Coating and 98385XAM8

0.16

Correlation Coefficient

Axalta Coating  98385XAM8

Average diversification

The 3 months correlation between Axalta and 98385XAM8 is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and XTO ENERGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTO ENERGY 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 98385XAM8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTO ENERGY INC has no effect on the direction of Axalta Coating i.e., Axalta Coating and 98385XAM8 go up and down completely randomly.

Pair Corralation between Axalta Coating and 98385XAM8

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the 98385XAM8. In addition to that, Axalta Coating is 1.42 times more volatile than XTO ENERGY INC. It trades about -0.06 of its total potential returns per unit of risk. XTO ENERGY INC is currently generating about -0.01 per unit of volatility. If you would invest  11,617  in XTO ENERGY INC on October 11, 2024 and sell it today you would lose (75.00) from holding XTO ENERGY INC or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	56.45%
Values	Daily Returns

Axalta Coating Systems  vs.  XTO ENERGY INC

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.

XTO ENERGY INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XTO ENERGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 98385XAM8 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Axalta Coating and 98385XAM8

The main advantage of trading using opposite Axalta Coating and 98385XAM8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axalta Coating position performs unexpectedly, 98385XAM8 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 98385XAM8 will offset losses from the drop in 98385XAM8's long position.

The idea behind Axalta Coating Systems and XTO ENERGY 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.

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.