Correlation Between Coty and Gentex
Can any of the company-specific risk be diversified away by investing in both Coty and Gentex 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 Gentex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Gentex, you can compare the effects of market volatilities on Coty and Gentex 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 Gentex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Gentex.
Diversification Opportunities for Coty and Gentex
Very weak diversification
The 3 months correlation between Coty and Gentex is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Coty i.e., Coty and Gentex go up and down completely randomly.
Pair Corralation between Coty and Gentex
Given the investment horizon of 90 days Coty Inc is expected to under-perform the Gentex. In addition to that, Coty is 1.5 times more volatile than Gentex. It trades about -0.09 of its total potential returns per unit of risk. Gentex is currently generating about -0.07 per unit of volatility. If you would invest 3,402 in Gentex on November 3, 2024 and sell it today you would lose (810.00) from holding Gentex or give up 23.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Gentex
Performance |
| Timeline |
| Coty Inc |
| Gentex |
Coty and Gentex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Gentex
The main advantage of trading using opposite Coty and Gentex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Gentex 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 Gentex will offset losses from the drop in Gentex's long position.The idea behind Coty Inc and Gentex 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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