Correlation Between Automatic Data and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Colgate Palmolive 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 Automatic Data and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and Colgate Palmolive, you can compare the effects of market volatilities on Automatic Data and Colgate Palmolive 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 Automatic Data with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Colgate Palmolive.
Diversification Opportunities for Automatic Data and Colgate Palmolive
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Automatic and Colgate is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Automatic Data 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 Automatic Data Processing are associated (or correlated) with Colgate Palmolive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colgate Palmolive has no effect on the direction of Automatic Data i.e., Automatic Data and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Automatic Data and Colgate Palmolive
Assuming the 90 days horizon Automatic Data Processing is expected to generate 1.06 times more return on investment than Colgate Palmolive. However, Automatic Data is 1.06 times more volatile than Colgate Palmolive. It trades about 0.15 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.06 per unit of risk. If you would invest 25,064 in Automatic Data Processing on November 1, 2024 and sell it today you would earn a total of 3,651 from holding Automatic Data Processing or generate 14.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Colgate Palmolive
Performance |
| Timeline |
| Automatic Data Processing |
| Colgate Palmolive |
Automatic Data and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Colgate Palmolive
The main advantage of trading using opposite Automatic Data and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Colgate Palmolive 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 Colgate Palmolive will offset losses from the drop in Colgate Palmolive's long position.| Automatic Data vs. Quaker Chemical | Automatic Data vs. X FAB Silicon Foundries | Automatic Data vs. INDO RAMA SYNTHETIC | Automatic Data vs. TIANDE CHEMICAL |
| Colgate Palmolive vs. ASURE SOFTWARE | Colgate Palmolive vs. Jacquet Metal Service | Colgate Palmolive vs. GREENX METALS LTD | Colgate Palmolive vs. Nippon Light Metal |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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