Correlation Between Origin Materials and Axalta Coating

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

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

Diversification Opportunities for Origin Materials and Axalta Coating

0.27

Correlation Coefficient

Origin Materials  Axalta Coating

Modest diversification

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

Pair Corralation between Origin Materials and Axalta Coating

Given the investment horizon of 90 days Origin Materials is expected to generate 2.26 times less return on investment than Axalta Coating. In addition to that, Origin Materials is 2.86 times more volatile than Axalta Coating Systems. It trades about 0.0 of its total potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.03 per unit of volatility. If you would invest  3,594  in Axalta Coating Systems on December 2, 2024 and sell it today you would earn a total of  27.00  from holding Axalta Coating Systems or generate 0.75% return on investment over 90 days.

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

Origin Materials  vs.  Axalta Coating Systems

Origin Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 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 Origin Materials and Axalta Coating

The main advantage of trading using opposite Origin Materials and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials 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 Origin Materials 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.