Correlation Between Coty and NI Holdings

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

By analyzing existing cross correlation between Coty Inc and NI Holdings, you can compare the effects of market volatilities on Coty and NI Holdings 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 Coty with a short position of NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and NI Holdings.

Diversification Opportunities for Coty and NI Holdings

-0.59

Correlation Coefficient

Coty  NI Holdings

Excellent diversification

The 3 months correlation between Coty and NODK is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Coty 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 Coty Inc are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Coty i.e., Coty and NI Holdings go up and down completely randomly.

Pair Corralation between Coty and NI Holdings

Given the investment horizon of 90 days Coty Inc is expected to under-perform the NI Holdings. In addition to that, Coty is 1.71 times more volatile than NI Holdings. It trades about -0.15 of its total potential returns per unit of risk. NI Holdings is currently generating about 0.11 per unit of volatility. If you would invest  1,515  in NI Holdings on September 18, 2024 and sell it today you would earn a total of  145.00  from holding NI Holdings or generate 9.57% return on investment over 90 days.

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

Coty Inc  vs.  NI Holdings

Coty Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coty Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly 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.

NI Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coty and NI Holdings

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

The idea behind Coty Inc and NI Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.