Correlation Between Axalta Coating and Ecovyst

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

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

Diversification Opportunities for Axalta Coating and Ecovyst

0.92

Correlation Coefficient

Axalta Coating  Ecovyst

Almost no diversification

The 3 months correlation between Axalta and Ecovyst is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst and Axalta Coating 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 Axalta Coating Systems are associated (or correlated) with Ecovyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecovyst has no effect on the direction of Axalta Coating i.e., Axalta Coating and Ecovyst go up and down completely randomly.

Pair Corralation between Axalta Coating and Ecovyst

Given the investment horizon of 90 days Axalta Coating is expected to generate 8.05 times less return on investment than Ecovyst. But when comparing it to its historical volatility, Axalta Coating Systems is 1.7 times less risky than Ecovyst. It trades about 0.02 of its potential returns per unit of risk. Ecovyst is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Ecovyst on September 20, 2024 and sell it today you would earn a total of  82.00  from holding Ecovyst or generate 12.62% return on investment over 90 days.

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

Axalta Coating Systems  vs.  Ecovyst

Axalta Coating Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Ecovyst

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecovyst are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ecovyst unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axalta Coating and Ecovyst

The main advantage of trading using opposite Axalta Coating and Ecovyst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axalta Coating position performs unexpectedly, Ecovyst 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 Ecovyst will offset losses from the drop in Ecovyst's long position.

The idea behind Axalta Coating Systems and Ecovyst 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.