Correlation Between United Guardian and Coty

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

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

Diversification Opportunities for United Guardian and Coty

0.09

Correlation Coefficient

United Guardian  Coty

Significant diversification

The 3 months correlation between United and Coty is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and United Guardian 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 United Guardian 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 United Guardian i.e., United Guardian and Coty go up and down completely randomly.

Pair Corralation between United Guardian and Coty

Allowing for the 90-day total investment horizon United Guardian is expected to generate 0.81 times more return on investment than Coty. However, United Guardian is 1.23 times less risky than Coty. It trades about -0.03 of its potential returns per unit of risk. Coty Inc is currently generating about -0.15 per unit of risk. If you would invest  946.00  in United Guardian on December 27, 2024 and sell it today you would lose (50.00) from holding United Guardian or give up 5.29% of portfolio value over 90 days.

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

United Guardian  vs.  Coty Inc

United Guardian

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, United Guardian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 United Guardian and Coty

The main advantage of trading using opposite United Guardian and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Guardian 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 United Guardian 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.