Correlation Between Procter Gamble and Coty

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

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

Diversification Opportunities for Procter Gamble and Coty

0.4

Correlation Coefficient

Procter Gamble  Coty

Very weak diversification

The 3 months correlation between Procter and Coty is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Procter Gamble and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and Procter Gamble 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 The Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Coty go up and down completely randomly.

Pair Corralation between Procter Gamble and Coty

Assuming the 90 days trading horizon The Procter Gamble is expected to generate 0.59 times more return on investment than Coty. However, The Procter Gamble is 1.68 times less risky than Coty. It trades about -0.06 of its potential returns per unit of risk. Coty Inc is currently generating about -0.18 per unit of risk. If you would invest  7,337  in The Procter Gamble on December 29, 2024 and sell it today you would lose (444.00) from holding The Procter Gamble or give up 6.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

The Procter Gamble  vs.  Coty Inc

Procter Gamble

Risk-Adjusted Performance

Very Weak

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

Coty Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coty Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Procter Gamble and Coty

The main advantage of trading using opposite Procter Gamble and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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 The Procter Gamble 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.