Correlation Between Coty and Central Garden
Can any of the company-specific risk be diversified away by investing in both Coty and Central Garden 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 Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Central Garden Pet, you can compare the effects of market volatilities on Coty and Central Garden 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 Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Central Garden.
Diversification Opportunities for Coty and Central Garden
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Coty and Central is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet 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 Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Coty i.e., Coty and Central Garden go up and down completely randomly.
Pair Corralation between Coty and Central Garden
Given the investment horizon of 90 days Coty Inc is expected to under-perform the Central Garden. In addition to that, Coty is 1.26 times more volatile than Central Garden Pet. It trades about -0.09 of its total potential returns per unit of risk. Central Garden Pet is currently generating about 0.4 per unit of volatility. If you would invest 2,976 in Central Garden Pet on August 30, 2024 and sell it today you would earn a total of 437.00 from holding Central Garden Pet or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Central Garden Pet
Performance |
| Timeline |
| Coty Inc |
| Central Garden Pet |
Coty and Central Garden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Central Garden
The main advantage of trading using opposite Coty and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.The idea behind Coty Inc and Central Garden Pet 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.| Central Garden vs. Seneca Foods Corp | Central Garden vs. Central Garden Pet | Central Garden vs. Natures Sunshine Products | Central Garden vs. Associated British Foods |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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