Correlation Between Coty and Bombril SA

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

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

Diversification Opportunities for Coty and Bombril SA

-0.48

Correlation Coefficient

Coty  Bombril SA

Very good diversification

The 3 months correlation between Coty and Bombril is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Bombril SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombril SA 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 Bombril SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombril SA has no effect on the direction of Coty i.e., Coty and Bombril SA go up and down completely randomly.

Pair Corralation between Coty and Bombril SA

Assuming the 90 days trading horizon Coty Inc is expected to under-perform the Bombril SA. In addition to that, Coty is 1.0 times more volatile than Bombril SA. It trades about -0.07 of its total potential returns per unit of risk. Bombril SA is currently generating about -0.03 per unit of volatility. If you would invest  227.00  in Bombril SA on September 17, 2024 and sell it today you would lose (16.00) from holding Bombril SA or give up 7.05% of portfolio value over 90 days.

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

Coty Inc  vs.  Bombril SA

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. Despite 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.

Bombril SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombril SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bombril SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coty and Bombril SA

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

The idea behind Coty Inc and Bombril SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..