Correlation Between Coty and Herbalife Nutrition
Can any of the company-specific risk be diversified away by investing in both Coty and Herbalife Nutrition 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 Herbalife Nutrition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Herbalife Nutrition, you can compare the effects of market volatilities on Coty and Herbalife Nutrition 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 Herbalife Nutrition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Herbalife Nutrition.
Diversification Opportunities for Coty and Herbalife Nutrition
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Coty and Herbalife is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition 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 Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of Coty i.e., Coty and Herbalife Nutrition go up and down completely randomly.
Pair Corralation between Coty and Herbalife Nutrition
Given the investment horizon of 90 days Coty Inc is expected to under-perform the Herbalife Nutrition. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 2.2 times less risky than Herbalife Nutrition. The stock trades about -0.07 of its potential returns per unit of risk. The Herbalife Nutrition is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 694.00 in Herbalife Nutrition on August 29, 2024 and sell it today you would earn a total of 96.00 from holding Herbalife Nutrition or generate 13.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Herbalife Nutrition
Performance |
| Timeline |
| Coty Inc |
| Herbalife Nutrition |
Coty and Herbalife Nutrition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Herbalife Nutrition
The main advantage of trading using opposite Coty and Herbalife Nutrition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Herbalife Nutrition 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 Herbalife Nutrition will offset losses from the drop in Herbalife Nutrition's long position.The idea behind Coty Inc and Herbalife Nutrition 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.| Herbalife Nutrition vs. Hims Hers Health | Herbalife Nutrition vs. Procter Gamble | Herbalife Nutrition vs. Kimberly Clark | Herbalife Nutrition vs. Colgate Palmolive |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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