Correlation Between Axalta Coating and NextNav Warrant

Can any of the company-specific risk be diversified away by investing in both Axalta Coating and NextNav Warrant 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 NextNav Warrant 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 NextNav Warrant, you can compare the effects of market volatilities on Axalta Coating and NextNav Warrant 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 NextNav Warrant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and NextNav Warrant.

Diversification Opportunities for Axalta Coating and NextNav Warrant

0.76

Correlation Coefficient

Axalta Coating  NextNav Warrant

Poor diversification

The 3 months correlation between Axalta and NextNav is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and NextNav Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextNav Warrant 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 NextNav Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextNav Warrant has no effect on the direction of Axalta Coating i.e., Axalta Coating and NextNav Warrant go up and down completely randomly.

Pair Corralation between Axalta Coating and NextNav Warrant

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the NextNav Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 2.75 times less risky than NextNav Warrant. The stock trades about -0.04 of its potential returns per unit of risk. The NextNav Warrant is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  262.00  in NextNav Warrant on September 22, 2024 and sell it today you would earn a total of  308.00  from holding NextNav Warrant or generate 117.56% return on investment over 90 days.

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

Axalta Coating Systems  vs.  NextNav Warrant

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 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.

NextNav Warrant

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axalta Coating and NextNav Warrant

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

The idea behind Axalta Coating Systems and NextNav Warrant 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.