Correlation Between Gap, and Axalta Coating

Can any of the company-specific risk be diversified away by investing in both Gap, and Axalta Coating 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 Gap, and Axalta Coating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Gap, and Axalta Coating Systems, you can compare the effects of market volatilities on Gap, and Axalta Coating 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 Gap, with a short position of Axalta Coating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Axalta Coating.

Diversification Opportunities for Gap, and Axalta Coating

0.48

Correlation Coefficient

Gap,  Axalta Coating

Very weak diversification

The 3 months correlation between Gap, and Axalta is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Axalta Coating Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axalta Coating Systems and Gap, 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 The Gap, are associated (or correlated) with Axalta Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axalta Coating Systems has no effect on the direction of Gap, i.e., Gap, and Axalta Coating go up and down completely randomly.

Pair Corralation between Gap, and Axalta Coating

Considering the 90-day investment horizon The Gap, is expected to generate 1.89 times more return on investment than Axalta Coating. However, Gap, is 1.89 times more volatile than Axalta Coating Systems. It trades about -0.05 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about -0.73 per unit of risk. If you would invest  2,483  in The Gap, on September 24, 2024 and sell it today you would lose (72.00) from holding The Gap, or give up 2.9% of portfolio value over 90 days.

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

The Gap,  vs.  Axalta Coating Systems

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

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 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.

Pair Trading with Gap, and Axalta Coating

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

The idea behind The Gap, and Axalta Coating Systems 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.