Correlation Between Axalta Coating and RPM International
Can any of the company-specific risk be diversified away by investing in both Axalta Coating and RPM International 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 RPM International 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 RPM International, you can compare the effects of market volatilities on Axalta Coating and RPM International 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 RPM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and RPM International.
Diversification Opportunities for Axalta Coating and RPM International
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Axalta and RPM is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International 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 RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Axalta Coating i.e., Axalta Coating and RPM International go up and down completely randomly.
Pair Corralation between Axalta Coating and RPM International
Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 1.76 times more return on investment than RPM International. However, Axalta Coating is 1.76 times more volatile than RPM International. It trades about 0.33 of its potential returns per unit of risk. RPM International is currently generating about 0.31 per unit of risk. If you would invest 3,559 in Axalta Coating Systems on August 27, 2024 and sell it today you would earn a total of 570.00 from holding Axalta Coating Systems or generate 16.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axalta Coating Systems vs. RPM International
Performance |
| Timeline |
| Axalta Coating Systems |
| RPM International |
Axalta Coating and RPM International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axalta Coating and RPM International
The main advantage of trading using opposite Axalta Coating and RPM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axalta Coating position performs unexpectedly, RPM International 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 RPM International will offset losses from the drop in RPM International's long position.| Axalta Coating vs. Avient Corp | Axalta Coating vs. H B Fuller | Axalta Coating vs. Quaker Chemical | Axalta Coating vs. Cabot |
| RPM International vs. Oil Dri | RPM International vs. H B Fuller | RPM International vs. Northern Technologies | RPM International vs. Cabot |
Check out your portfolio center.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.
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