Correlation Between Axalta Coating and Stepan
Can any of the company-specific risk be diversified away by investing in both Axalta Coating and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Axalta Coating and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and Stepan.
Diversification Opportunities for Axalta Coating and Stepan
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Axalta and Stepan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Axalta Coating i.e., Axalta Coating and Stepan go up and down completely randomly.
Pair Corralation between Axalta Coating and Stepan
Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 0.89 times more return on investment than Stepan. However, Axalta Coating Systems is 1.12 times less risky than Stepan. It trades about 0.33 of its potential returns per unit of risk. Stepan Company is currently generating about 0.11 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axalta Coating Systems vs. Stepan Company
Performance |
| Timeline |
| Axalta Coating Systems |
| Stepan Company |
Axalta Coating and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axalta Coating and Stepan
The main advantage of trading using opposite Axalta Coating and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axalta Coating position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Axalta Coating vs. Avient Corp | Axalta Coating vs. H B Fuller | Axalta Coating vs. Quaker Chemical | Axalta Coating 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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