Correlation Between Cheniere Energy and Coty

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

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

Diversification Opportunities for Cheniere Energy and Coty

-0.51

Correlation Coefficient

Cheniere Energy  Coty

Excellent diversification

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

Pair Corralation between Cheniere Energy and Coty

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 1.2 times more return on investment than Coty. However, Cheniere Energy is 1.2 times more volatile than Coty Inc. It trades about -0.09 of its potential returns per unit of risk. Coty Inc is currently generating about -0.19 per unit of risk. If you would invest  5,432  in Cheniere Energy Partners on September 24, 2024 and sell it today you would lose (210.00) from holding Cheniere Energy Partners or give up 3.87% of portfolio value over 90 days.

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

Cheniere Energy Partners  vs.  Coty Inc

Cheniere Energy Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Cheniere Energy and Coty

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

The idea behind Cheniere Energy Partners and Coty Inc 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.