Correlation Between NL Industries and Axalta Coating

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

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

Diversification Opportunities for NL Industries and Axalta Coating

-0.27

Correlation Coefficient

NL Industries  Axalta Coating

Very good diversification

The 3 months correlation between NL Industries and Axalta is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries 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 NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and Axalta Coating go up and down completely randomly.

Pair Corralation between NL Industries and Axalta Coating

Allowing for the 90-day total investment horizon NL Industries is expected to generate 1.71 times more return on investment than Axalta Coating. However, NL Industries is 1.71 times more volatile than Axalta Coating Systems. It trades about 0.02 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about -0.02 per unit of risk. If you would invest  788.00  in NL Industries on December 27, 2024 and sell it today you would earn a total of  11.00  from holding NL Industries or generate 1.4% return on investment over 90 days.

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

NL Industries  vs.  Axalta Coating Systems

NL Industries

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Axalta Coating Systems

Risk-Adjusted Performance

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 NL Industries and Axalta Coating

The main advantage of trading using opposite NL Industries and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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 NL Industries 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.