Correlation Between Axalta Coating and Aegon NV

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

Diversification Opportunities for Axalta Coating and Aegon NV

0.3

Correlation Coefficient

Axalta Coating  Aegon NV

Weak diversification

The 3 months correlation between Axalta and Aegon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR 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 Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of Axalta Coating i.e., Axalta Coating and Aegon NV go up and down completely randomly.

Pair Corralation between Axalta Coating and Aegon NV

Given the investment horizon of 90 days Axalta Coating Systems is expected to under-perform the Aegon NV. But the stock apears to be less risky and, when comparing its historical volatility, Axalta Coating Systems is 1.18 times less risky than Aegon NV. The stock trades about -0.3 of its potential returns per unit of risk. The Aegon NV ADR is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  636.00  in Aegon NV ADR on January 4, 2025 and sell it today you would lose (62.00) from holding Aegon NV ADR or give up 9.75% of portfolio value over 90 days.

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

Axalta Coating Systems  vs.  Aegon NV ADR

Axalta Coating Systems

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Aegon NV ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Aegon NV 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 Aegon NV

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

The idea behind Axalta Coating Systems and Aegon NV ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.