Correlation Between Coty and Acme United

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

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

Diversification Opportunities for Coty and Acme United

0.09

Correlation Coefficient

Coty  Acme United

Significant diversification

The 3 months correlation between Coty and Acme is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Acme United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acme United 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 Acme United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acme United has no effect on the direction of Coty i.e., Coty and Acme United go up and down completely randomly.

Pair Corralation between Coty and Acme United

Given the investment horizon of 90 days Coty Inc is expected to under-perform the Acme United. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 1.5 times less risky than Acme United. The stock trades about -0.01 of its potential returns per unit of risk. The Acme United is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,090  in Acme United on September 23, 2024 and sell it today you would earn a total of  1,699  from holding Acme United or generate 81.29% return on investment over 90 days.

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

Coty Inc  vs.  Acme United

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 weak 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.

Acme United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Coty and Acme United

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

The idea behind Coty Inc and Acme United 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.