Correlation Between Coty and Kaival Brands

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

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

Diversification Opportunities for Coty and Kaival Brands

0.51

Correlation Coefficient

Coty  Kaival Brands

Very weak diversification

The 3 months correlation between Coty and Kaival is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Kaival Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaival Brands Innovations 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 Kaival Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaival Brands Innovations has no effect on the direction of Coty i.e., Coty and Kaival Brands go up and down completely randomly.

Pair Corralation between Coty and Kaival Brands

Given the investment horizon of 90 days Coty Inc is expected to under-perform the Kaival Brands. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 2.89 times less risky than Kaival Brands. The stock trades about -0.17 of its potential returns per unit of risk. The Kaival Brands Innovations is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  72.00  in Kaival Brands Innovations on September 25, 2024 and sell it today you would earn a total of  11.00  from holding Kaival Brands Innovations or generate 15.28% return on investment over 90 days.

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

Coty Inc  vs.  Kaival Brands Innovations

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.

Kaival Brands Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaival Brands Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Coty and Kaival Brands

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

The idea behind Coty Inc and Kaival Brands Innovations 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.