Correlation Between 191216DP2 and Coty

Can any of the company-specific risk be diversified away by investing in both 191216DP2 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 191216DP2 and Coty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COCA COLA CO and Coty Inc, you can compare the effects of market volatilities on 191216DP2 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 191216DP2 with a short position of Coty. Check out your portfolio center. Please also check ongoing floating volatility patterns of 191216DP2 and Coty.

Diversification Opportunities for 191216DP2 and Coty

0.88

Correlation Coefficient

191216DP2  Coty

Very poor diversification

The 3 months correlation between 191216DP2 and Coty is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding COCA COLA CO and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and 191216DP2 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 COCA COLA 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 191216DP2 i.e., 191216DP2 and Coty go up and down completely randomly.

Pair Corralation between 191216DP2 and Coty

Assuming the 90 days trading horizon COCA COLA CO is expected to generate 0.29 times more return on investment than Coty. However, COCA COLA CO is 3.49 times less risky than Coty. It trades about 0.01 of its potential returns per unit of risk. Coty Inc is currently generating about -0.01 per unit of risk. If you would invest  8,419  in COCA COLA CO on September 24, 2024 and sell it today you would earn a total of  101.00  from holding COCA COLA CO or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.0%
Values	Daily Returns

COCA COLA CO  vs.  Coty Inc

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216DP2 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

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 191216DP2 and Coty

The main advantage of trading using opposite 191216DP2 and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 191216DP2 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 COCA COLA 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.

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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..