Correlation Between Kenvue and Coty
Can any of the company-specific risk be diversified away by investing in both Kenvue and Coty 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 Kenvue and Coty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kenvue Inc and Coty Inc, you can compare the effects of market volatilities on Kenvue and Coty 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 Kenvue with a short position of Coty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenvue and Coty.
Diversification Opportunities for Kenvue and Coty
Very good diversification
The 3 months correlation between Kenvue and Coty is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Kenvue Inc and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and Kenvue 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 Kenvue Inc are associated (or correlated) with Coty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coty Inc has no effect on the direction of Kenvue i.e., Kenvue and Coty go up and down completely randomly.
Pair Corralation between Kenvue and Coty
Given the investment horizon of 90 days Kenvue Inc is expected to generate 0.65 times more return on investment than Coty. However, Kenvue Inc is 1.54 times less risky than Coty. It trades about 0.25 of its potential returns per unit of risk. Coty Inc is currently generating about -0.03 per unit of risk. If you would invest 2,268 in Kenvue Inc on August 28, 2024 and sell it today you would earn a total of 156.00 from holding Kenvue Inc or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kenvue Inc vs. Coty Inc
Performance |
| Timeline |
| Kenvue Inc |
| Coty Inc |
Kenvue and Coty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kenvue and Coty
The main advantage of trading using opposite Kenvue and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kenvue position performs unexpectedly, Coty 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 Coty will offset losses from the drop in Coty's long position.The idea behind Kenvue Inc and Coty Inc 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.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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