Correlation Between Coty and Aker BP

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Can any of the company-specific risk be diversified away by investing in both Coty and Aker BP 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 Coty and Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Aker BP ASA, you can compare the effects of market volatilities on Coty and Aker BP 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 Coty with a short position of Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Aker BP.

Diversification Opportunities for Coty and Aker BP

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Coty and Aker is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA and Coty 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 Coty Inc are associated (or correlated) with Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Coty i.e., Coty and Aker BP go up and down completely randomly.

Pair Corralation between Coty and Aker BP

Given the investment horizon of 90 days Coty is expected to generate 1.57 times less return on investment than Aker BP. But when comparing it to its historical volatility, Coty Inc is 2.51 times less risky than Aker BP. It trades about 0.17 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  956.00  in Aker BP ASA on November 3, 2024 and sell it today you would earn a total of  86.00  from holding Aker BP ASA or generate 9.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Coty Inc  vs.  Aker BP ASA

 Performance 
       Timeline  
Coty Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 fairly strong basic indicators, Coty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Aker BP ASA 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Aker BP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Coty and Aker BP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coty and Aker BP

The main advantage of trading using opposite Coty and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.
The idea behind Coty Inc and Aker BP ASA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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