Correlation Between Axalta Coating and Orica

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

Diversification Opportunities for Axalta Coating and Orica

-0.42

Correlation Coefficient

Axalta Coating  Orica

Very good diversification

The 3 months correlation between Axalta and Orica is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited 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 Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Limited has no effect on the direction of Axalta Coating i.e., Axalta Coating and Orica go up and down completely randomly.

Pair Corralation between Axalta Coating and Orica

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 4.61 times more return on investment than Orica. However, Axalta Coating is 4.61 times more volatile than Orica Limited. It trades about 0.08 of its potential returns per unit of risk. Orica Limited is currently generating about -0.13 per unit of risk. If you would invest  3,516  in Axalta Coating Systems on September 14, 2024 and sell it today you would earn a total of  301.00  from holding Axalta Coating Systems or generate 8.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Axalta Coating Systems  vs.  Orica Limited

Axalta Coating Systems

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Axalta Coating may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Orica Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orica Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Orica is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Axalta Coating and Orica

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

The idea behind Axalta Coating Systems and Orica Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.