Correlation Between Kaiser Aluminum and Axalta Coating

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

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

Diversification Opportunities for Kaiser Aluminum and Axalta Coating

0.93

Correlation Coefficient

Kaiser Aluminum  Axalta Coating

Almost no diversification

The 3 months correlation between Kaiser and Axalta is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Axalta Coating go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Axalta Coating

Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the Axalta Coating. In addition to that, Kaiser Aluminum is 1.04 times more volatile than Axalta Coating Systems. It trades about -0.28 of its total potential returns per unit of risk. Axalta Coating Systems is currently generating about -0.2 per unit of volatility. If you would invest  4,129  in Axalta Coating Systems on October 25, 2024 and sell it today you would lose (449.00) from holding Axalta Coating Systems or give up 10.87% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  Axalta Coating Systems

Kaiser Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Axalta Coating Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Kaiser Aluminum and Axalta Coating

The main advantage of trading using opposite Kaiser Aluminum and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.