Correlation Between Coty and Kimberly Clark
Can any of the company-specific risk be diversified away by investing in both Coty and Kimberly Clark 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 Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Kimberly Clark, you can compare the effects of market volatilities on Coty and Kimberly Clark 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 Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Kimberly Clark.
Diversification Opportunities for Coty and Kimberly Clark
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coty and Kimberly is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of Coty i.e., Coty and Kimberly Clark go up and down completely randomly.
Pair Corralation between Coty and Kimberly Clark
Given the investment horizon of 90 days Coty Inc is expected to under-perform the Kimberly Clark. In addition to that, Coty is 2.06 times more volatile than Kimberly Clark. It trades about -0.07 of its total potential returns per unit of risk. Kimberly Clark is currently generating about 0.05 per unit of volatility. If you would invest 13,701 in Kimberly Clark on August 25, 2024 and sell it today you would earn a total of 141.00 from holding Kimberly Clark or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Kimberly Clark
Performance |
| Timeline |
| Coty Inc |
| Kimberly Clark |
Coty and Kimberly Clark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Kimberly Clark
The main advantage of trading using opposite Coty and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.The idea behind Coty Inc and Kimberly Clark 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.| Kimberly Clark vs. Unilever PLC ADR | Kimberly Clark vs. Estee Lauder Companies | Kimberly Clark vs. ELF Beauty | Kimberly Clark vs. Coty Inc |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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