Correlation Between Element Solutions and Axalta Coating

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

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

Diversification Opportunities for Element Solutions and Axalta Coating

0.88

Correlation Coefficient

Element Solutions  Axalta Coating

Very poor diversification

The 3 months correlation between Element and Axalta is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions 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 Element Solutions 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 Element Solutions 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 Element Solutions i.e., Element Solutions and Axalta Coating go up and down completely randomly.

Pair Corralation between Element Solutions and Axalta Coating

Considering the 90-day investment horizon Element Solutions is expected to under-perform the Axalta Coating. In addition to that, Element Solutions is 1.39 times more volatile than Axalta Coating Systems. It trades about -0.15 of its total potential returns per unit of risk. Axalta Coating Systems is currently generating about -0.06 per unit of volatility. If you would invest  3,418  in Axalta Coating Systems on January 25, 2025 and sell it today you would lose (190.00) from holding Axalta Coating Systems or give up 5.56% of portfolio value over 90 days.

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

Element Solutions  vs.  Axalta Coating Systems

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Element Solutions and Axalta Coating

The main advantage of trading using opposite Element Solutions and Axalta Coating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions 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 Element Solutions 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.