Correlation Between Coty and Calliditas Therapeutics

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

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

Diversification Opportunities for Coty and Calliditas Therapeutics

0.51

Correlation Coefficient

Coty  Calliditas Therapeutics

Very weak diversification

The 3 months correlation between Coty and Calliditas is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Calliditas Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calliditas Therapeutics 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 Calliditas Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calliditas Therapeutics has no effect on the direction of Coty i.e., Coty and Calliditas Therapeutics go up and down completely randomly.

Pair Corralation between Coty and Calliditas Therapeutics

Given the investment horizon of 90 days Coty Inc is expected to generate 0.47 times more return on investment than Calliditas Therapeutics. However, Coty Inc is 2.14 times less risky than Calliditas Therapeutics. It trades about 0.12 of its potential returns per unit of risk. Calliditas Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  1,103  in Coty Inc on February 5, 2024 and sell it today you would earn a total of  57.00  from holding Coty Inc or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Coty Inc  vs.  Calliditas Therapeutics

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 fairly strong basic indicators, Coty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calliditas Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calliditas Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Calliditas Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coty and Calliditas Therapeutics

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

The idea behind Coty Inc and Calliditas Therapeutics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.