Correlation Between Magnite and Axalta Coating

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

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

Diversification Opportunities for Magnite and Axalta Coating

0.28

Correlation Coefficient

Magnite  Axalta Coating

Modest diversification

The 3 months correlation between Magnite and Axalta is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Magnite 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 Magnite 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 Magnite 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 Magnite i.e., Magnite and Axalta Coating go up and down completely randomly.

Pair Corralation between Magnite and Axalta Coating

Given the investment horizon of 90 days Magnite is expected to generate 2.52 times more return on investment than Axalta Coating. However, Magnite is 2.52 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 0.04 per unit of risk. If you would invest  993.00  in Magnite on October 11, 2024 and sell it today you would earn a total of  653.00  from holding Magnite or generate 65.76% return on investment over 90 days.

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

Magnite  vs.  Axalta Coating Systems

Magnite

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated 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 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.

Pair Trading with Magnite and Axalta Coating

The main advantage of trading using opposite Magnite and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnite 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 Magnite 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.