Correlation Between Beauty Health and Coty

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

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

Diversification Opportunities for Beauty Health and Coty

0.6

Correlation Coefficient

Beauty Health  Coty

Poor diversification

The 3 months correlation between Beauty and Coty is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and Beauty Health 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 Beauty Health Co 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 Beauty Health i.e., Beauty Health and Coty go up and down completely randomly.

Pair Corralation between Beauty Health and Coty

Given the investment horizon of 90 days Beauty Health Co is expected to generate 1.79 times more return on investment than Coty. However, Beauty Health is 1.79 times more volatile than Coty Inc. It trades about -0.04 of its potential returns per unit of risk. Coty Inc is currently generating about -0.13 per unit of risk. If you would invest  160.00  in Beauty Health Co on December 28, 2024 and sell it today you would lose (26.00) from holding Beauty Health Co or give up 16.25% of portfolio value over 90 days.

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

Beauty Health Co  vs.  Coty Inc

Beauty Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beauty Health Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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. 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Beauty Health and Coty

The main advantage of trading using opposite Beauty Health and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beauty Health 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 Beauty Health Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.