Correlation Between LyondellBasell Industries and Axalta Coating

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

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

Diversification Opportunities for LyondellBasell Industries and Axalta Coating

-0.22

Correlation Coefficient

LyondellBasell Industries  Axalta Coating

Very good diversification

The 3 months correlation between LyondellBasell and Axalta is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV 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 LyondellBasell Industries 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 LyondellBasell Industries NV 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 LyondellBasell Industries i.e., LyondellBasell Industries and Axalta Coating go up and down completely randomly.

Pair Corralation between LyondellBasell Industries and Axalta Coating

Considering the 90-day investment horizon LyondellBasell Industries NV is expected to generate 0.94 times more return on investment than Axalta Coating. However, LyondellBasell Industries NV is 1.07 times less risky than Axalta Coating. It trades about -0.4 of its potential returns per unit of risk. Axalta Coating Systems is currently generating about -0.61 per unit of risk. If you would invest  8,200  in LyondellBasell Industries NV on September 30, 2024 and sell it today you would lose (786.00) from holding LyondellBasell Industries NV or give up 9.59% of portfolio value over 90 days.

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

LyondellBasell Industries NV  vs.  Axalta Coating Systems

LyondellBasell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LyondellBasell Industries NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 somewhat strong basic indicators, Axalta Coating is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LyondellBasell Industries and Axalta Coating

The main advantage of trading using opposite LyondellBasell Industries and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries 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 LyondellBasell Industries NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.