Correlation Between Linde Plc and Axalta Coating

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

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

Diversification Opportunities for Linde Plc and Axalta Coating

-0.63

Correlation Coefficient

Linde Plc  Axalta Coating

Excellent diversification

The 3 months correlation between Linde and Axalta is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary 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 Linde Plc 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 Linde plc Ordinary 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 Linde Plc i.e., Linde Plc and Axalta Coating go up and down completely randomly.

Pair Corralation between Linde Plc and Axalta Coating

Considering the 90-day investment horizon Linde Plc is expected to generate 7.57 times less return on investment than Axalta Coating. But when comparing it to its historical volatility, Linde plc Ordinary is 1.81 times less risky than Axalta Coating. It trades about 0.05 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,798  in Axalta Coating Systems on September 2, 2024 and sell it today you would earn a total of  248.00  from holding Axalta Coating Systems or generate 6.53% return on investment over 90 days.

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

Linde plc Ordinary  vs.  Axalta Coating Systems

Linde plc Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Linde Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Axalta Coating Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Axalta Coating sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Linde Plc and Axalta Coating

The main advantage of trading using opposite Linde Plc and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde Plc 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 Linde plc Ordinary 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.