Correlation Between Coty and United Guardian
Can any of the company-specific risk be diversified away by investing in both Coty and United Guardian 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 United Guardian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and United Guardian, you can compare the effects of market volatilities on Coty and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and United Guardian.
Diversification Opportunities for Coty and United Guardian
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coty and United is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Coty i.e., Coty and United Guardian go up and down completely randomly.
Pair Corralation between Coty and United Guardian
Given the investment horizon of 90 days Coty Inc is expected to generate 0.6 times more return on investment than United Guardian. However, Coty Inc is 1.67 times less risky than United Guardian. It trades about -0.21 of its potential returns per unit of risk. United Guardian is currently generating about -0.26 per unit of risk. If you would invest 939.00 in Coty Inc on August 30, 2024 and sell it today you would lose (198.00) from holding Coty Inc or give up 21.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Coty Inc vs. United Guardian
Performance |
| Timeline |
| Coty Inc |
| United Guardian |
Coty and United Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and United Guardian
The main advantage of trading using opposite Coty and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.The idea behind Coty Inc and United Guardian 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.| United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Psychemedics | United Guardian vs. Unity Bancorp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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