Correlation Between Coty and FEDEX

Can any of the company-specific risk be diversified away by investing in both Coty and FEDEX 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 FEDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coty Inc and FEDEX P 475, you can compare the effects of market volatilities on Coty and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and FEDEX.

Diversification Opportunities for Coty and FEDEX

0.69

Correlation Coefficient

Coty  FEDEX

Poor diversification

The 3 months correlation between Coty and FEDEX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and FEDEX P 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 475 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 475 has no effect on the direction of Coty i.e., Coty and FEDEX go up and down completely randomly.

Pair Corralation between Coty and FEDEX

Given the investment horizon of 90 days Coty Inc is expected to generate 1.39 times more return on investment than FEDEX. However, Coty is 1.39 times more volatile than FEDEX P 475. It trades about 0.09 of its potential returns per unit of risk. FEDEX P 475 is currently generating about 0.04 per unit of risk. If you would invest  736.00  in Coty Inc on September 12, 2024 and sell it today you would earn a total of  26.00  from holding Coty Inc or generate 3.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Coty Inc  vs.  FEDEX P 475

Coty Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coty Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FEDEX P 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coty and FEDEX

The main advantage of trading using opposite Coty and FEDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty position performs unexpectedly, FEDEX 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 FEDEX will offset losses from the drop in FEDEX's long position.

The idea behind Coty Inc and FEDEX P 475 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.