Correlation Between Coty and 81619PAA5

Can any of the company-specific risk be diversified away by investing in both Coty and 81619PAA5 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 81619PAA5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coty Inc and US81619PAA57, you can compare the effects of market volatilities on Coty and 81619PAA5 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 81619PAA5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and 81619PAA5.

Diversification Opportunities for Coty and 81619PAA5

-0.26

Correlation Coefficient

Coty  81619PAA5

Very good diversification

The 3 months correlation between Coty and 81619PAA5 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and US81619PAA57 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US81619PAA57 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 81619PAA5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US81619PAA57 has no effect on the direction of Coty i.e., Coty and 81619PAA5 go up and down completely randomly.

Pair Corralation between Coty and 81619PAA5

Given the investment horizon of 90 days Coty Inc is expected to under-perform the 81619PAA5. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 1.18 times less risky than 81619PAA5. The stock trades about -0.08 of its potential returns per unit of risk. The US81619PAA57 is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  9,515  in US81619PAA57 on September 12, 2024 and sell it today you would lose (525.00) from holding US81619PAA57 or give up 5.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.94%
Values	Daily Returns

Coty Inc  vs.  US81619PAA57

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 latest weak 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.

US81619PAA57

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US81619PAA57 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for US81619PAA57 investors.

Pair Trading with Coty and 81619PAA5

The main advantage of trading using opposite Coty and 81619PAA5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, 81619PAA5 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 81619PAA5 will offset losses from the drop in 81619PAA5's long position.

The idea behind Coty Inc and US81619PAA57 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.