Correlation Between Steven Madden and Axalta Coating

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

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

Diversification Opportunities for Steven Madden and Axalta Coating

-0.34

Correlation Coefficient

Steven Madden  Axalta Coating

Very good diversification

The 3 months correlation between Steven and Axalta is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden 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 Steven Madden 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 Steven Madden 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 Steven Madden i.e., Steven Madden and Axalta Coating go up and down completely randomly.

Pair Corralation between Steven Madden and Axalta Coating

Given the investment horizon of 90 days Steven Madden is expected to under-perform the Axalta Coating. But the stock apears to be less risky and, when comparing its historical volatility, Steven Madden is 1.05 times less risky than Axalta Coating. The stock trades about -0.12 of its potential returns per unit of risk. The Axalta Coating Systems is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,725  in Axalta Coating Systems on September 27, 2024 and sell it today you would lose (288.00) from holding Axalta Coating Systems or give up 7.73% of portfolio value over 90 days.

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

Steven Madden  vs.  Axalta Coating Systems

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 Steven Madden and Axalta Coating

The main advantage of trading using opposite Steven Madden and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden 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 Steven Madden 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.