Correlation Between Coty and PacifiCorp
Can any of the company-specific risk be diversified away by investing in both Coty and PacifiCorp 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 PacifiCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and PacifiCorp, you can compare the effects of market volatilities on Coty and PacifiCorp 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 PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and PacifiCorp.
Diversification Opportunities for Coty and PacifiCorp
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Coty and PacifiCorp is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Coty i.e., Coty and PacifiCorp go up and down completely randomly.
Pair Corralation between Coty and PacifiCorp
Given the investment horizon of 90 days Coty Inc is expected to under-perform the PacifiCorp. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 7.05 times less risky than PacifiCorp. The stock trades about -0.06 of its potential returns per unit of risk. The PacifiCorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 16,567 in PacifiCorp on September 15, 2024 and sell it today you would lose (3,072) from holding PacifiCorp or give up 18.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 69.52% |
| Values | Daily Returns |
Coty Inc vs. PacifiCorp
Performance |
| Timeline |
| Coty Inc |
| PacifiCorp |
Coty and PacifiCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and PacifiCorp
The main advantage of trading using opposite Coty and PacifiCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, PacifiCorp 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 PacifiCorp will offset losses from the drop in PacifiCorp's long position.The idea behind Coty Inc and PacifiCorp 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.| PacifiCorp vs. Harmony Gold Mining | PacifiCorp vs. Contagious Gaming | PacifiCorp vs. Boyd Gaming | PacifiCorp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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