Correlation Between Coty and SHERWIN

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

By analyzing existing cross correlation between Coty Inc and SHERWIN WILLIAMS 45 percent, you can compare the effects of market volatilities on Coty and SHERWIN 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 SHERWIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and SHERWIN.

Diversification Opportunities for Coty and SHERWIN

0.22

Correlation Coefficient

Coty  SHERWIN

Modest diversification

The 3 months correlation between Coty and SHERWIN is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and SHERWIN WILLIAMS 45 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHERWIN WILLIAMS 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 SHERWIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHERWIN WILLIAMS has no effect on the direction of Coty i.e., Coty and SHERWIN go up and down completely randomly.

Pair Corralation between Coty and SHERWIN

Given the investment horizon of 90 days Coty Inc is expected to under-perform the SHERWIN. In addition to that, Coty is 2.08 times more volatile than SHERWIN WILLIAMS 45 percent. It trades about -0.05 of its total potential returns per unit of risk. SHERWIN WILLIAMS 45 percent is currently generating about -0.02 per unit of volatility. If you would invest  8,706  in SHERWIN WILLIAMS 45 percent on October 21, 2024 and sell it today you would lose (131.00) from holding SHERWIN WILLIAMS 45 percent or give up 1.5% of portfolio value over 90 days.

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

Coty Inc  vs.  SHERWIN WILLIAMS 45 percent

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 fairly strong basic indicators, Coty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SHERWIN WILLIAMS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHERWIN WILLIAMS 45 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SHERWIN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coty and SHERWIN

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

The idea behind Coty Inc and SHERWIN WILLIAMS 45 percent 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.