Correlation Between Coty and Tianjin Capital
Can any of the company-specific risk be diversified away by investing in both Coty and Tianjin Capital 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 Tianjin Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Tianjin Capital Environmental, you can compare the effects of market volatilities on Coty and Tianjin Capital 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 Tianjin Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Tianjin Capital.
Diversification Opportunities for Coty and Tianjin Capital
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coty and Tianjin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi 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 Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of Coty i.e., Coty and Tianjin Capital go up and down completely randomly.
Pair Corralation between Coty and Tianjin Capital
Given the investment horizon of 90 days Coty Inc is expected to under-perform the Tianjin Capital. But the stock apears to be less risky and, when comparing its historical volatility, Coty Inc is 2.9 times less risky than Tianjin Capital. The stock trades about -0.02 of its potential returns per unit of risk. The Tianjin Capital Environmental is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9.93 in Tianjin Capital Environmental on October 31, 2024 and sell it today you would earn a total of 28.07 from holding Tianjin Capital Environmental or generate 282.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Coty Inc vs. Tianjin Capital Environmental
Performance |
| Timeline |
| Coty Inc |
| Tianjin Capital Envi |
Coty and Tianjin Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Tianjin Capital
The main advantage of trading using opposite Coty and Tianjin Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, Tianjin Capital 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 Tianjin Capital will offset losses from the drop in Tianjin Capital's long position.The idea behind Coty Inc and Tianjin Capital Environmental 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.| Tianjin Capital vs. Cheche Group Class | Tianjin Capital vs. Radcom | Tianjin Capital vs. Pinterest | Tianjin Capital vs. Iridium Communications |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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