Correlation Between Gentex and Axalta Coating

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

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

Diversification Opportunities for Gentex and Axalta Coating

0.44

Correlation Coefficient

Gentex  Axalta Coating

Very weak diversification

The 3 months correlation between Gentex and Axalta is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gentex 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 Gentex 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 Gentex 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 Gentex i.e., Gentex and Axalta Coating go up and down completely randomly.

Pair Corralation between Gentex and Axalta Coating

Given the investment horizon of 90 days Gentex is expected to generate 1.79 times less return on investment than Axalta Coating. But when comparing it to its historical volatility, Gentex is 1.19 times less risky than Axalta Coating. It trades about 0.04 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,570  in Axalta Coating Systems on September 17, 2024 and sell it today you would earn a total of  222.00  from holding Axalta Coating Systems or generate 6.22% return on investment over 90 days.

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

Gentex  vs.  Axalta Coating Systems

Gentex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Axalta Coating Systems

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Axalta Coating may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gentex and Axalta Coating

The main advantage of trading using opposite Gentex and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex 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 Gentex 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.