Correlation Between Coty and Pan Global
Can any of the company-specific risk be diversified away by investing in both Coty and Pan Global 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 Pan Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Pan Global Resources, you can compare the effects of market volatilities on Coty and Pan Global 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 Pan Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Pan Global.
Diversification Opportunities for Coty and Pan Global
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coty and Pan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Pan Global Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Global Resources 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 Pan Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Global Resources has no effect on the direction of Coty i.e., Coty and Pan Global go up and down completely randomly.
Pair Corralation between Coty and Pan Global
Given the investment horizon of 90 days Coty Inc is expected to under-perform the Pan Global. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 2.53 times less risky than Pan Global. The stock trades about -0.16 of its potential returns per unit of risk. The Pan Global Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9.32 in Pan Global Resources on December 3, 2024 and sell it today you would earn a total of 0.28 from holding Pan Global Resources or generate 3.0% 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. Pan Global Resources
Performance |
| Timeline |
| Coty Inc |
| Pan Global Resources |
Coty and Pan Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Pan Global
The main advantage of trading using opposite Coty and Pan Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Pan Global 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 Pan Global will offset losses from the drop in Pan Global's long position.The idea behind Coty Inc and Pan Global Resources 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.| Pan Global vs. Tritent International Agriculture | ||
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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