Correlation Between Colgate Palmolive and Coty
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive 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 Colgate Palmolive and Coty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Coty Inc, you can compare the effects of market volatilities on Colgate Palmolive 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 Colgate Palmolive with a short position of Coty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Coty.
Diversification Opportunities for Colgate Palmolive and Coty
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Colgate and Coty is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc and Colgate Palmolive 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 Colgate Palmolive 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 Colgate Palmolive i.e., Colgate Palmolive and Coty go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Coty
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.65 times more return on investment than Coty. However, Colgate Palmolive is 1.53 times less risky than Coty. It trades about -0.01 of its potential returns per unit of risk. Coty Inc is currently generating about -0.03 per unit of risk. If you would invest 9,574 in Colgate Palmolive on August 28, 2024 and sell it today you would lose (40.00) from holding Colgate Palmolive or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Coty Inc
Performance |
| Timeline |
| Colgate Palmolive |
| Coty Inc |
Colgate Palmolive and Coty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Coty
The main advantage of trading using opposite Colgate Palmolive and Coty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive 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.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |