Correlation Between Axalta Coating and WesBanco

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

Diversification Opportunities for Axalta Coating and WesBanco

0.86

Correlation Coefficient

Axalta Coating  WesBanco

Very poor diversification

The 3 months correlation between Axalta and WesBanco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of Axalta Coating i.e., Axalta Coating and WesBanco go up and down completely randomly.

Pair Corralation between Axalta Coating and WesBanco

Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 5.59 times more return on investment than WesBanco. However, Axalta Coating is 5.59 times more volatile than WesBanco. It trades about 0.12 of its potential returns per unit of risk. WesBanco is currently generating about 0.19 per unit of risk. If you would invest  3,452  in Axalta Coating Systems on September 12, 2024 and sell it today you would earn a total of  469.00  from holding Axalta Coating Systems or generate 13.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Axalta Coating Systems  vs.  WesBanco

Axalta Coating Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Axalta Coating sustained solid returns over the last few months and may actually be approaching a breakup point.

WesBanco

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Axalta Coating and WesBanco

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

The idea behind Axalta Coating Systems and WesBanco 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.