Correlation Between Coty and Ecovyst

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

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

Diversification Opportunities for Coty and Ecovyst

-0.63

Correlation Coefficient

Coty  Ecovyst

Excellent diversification

The 3 months correlation between Coty and Ecovyst is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst 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 Ecovyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecovyst has no effect on the direction of Coty i.e., Coty and Ecovyst go up and down completely randomly.

Pair Corralation between Coty and Ecovyst

Given the investment horizon of 90 days Coty Inc is expected to generate 0.84 times more return on investment than Ecovyst. However, Coty Inc is 1.19 times less risky than Ecovyst. It trades about 0.0 of its potential returns per unit of risk. Ecovyst is currently generating about 0.0 per unit of risk. If you would invest  847.00  in Coty Inc on September 15, 2024 and sell it today you would lose (97.00) from holding Coty Inc or give up 11.45% of portfolio value over 90 days.

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

Coty Inc  vs.  Ecovyst

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.

Ecovyst

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecovyst are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ecovyst unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coty and Ecovyst

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

The idea behind Coty Inc and Ecovyst 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.