Correlation Between Colgate Palmolive and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Dollar Tree 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 Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Dollar Tree, you can compare the effects of market volatilities on Colgate Palmolive and Dollar Tree 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 Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Dollar Tree.
Diversification Opportunities for Colgate Palmolive and Dollar Tree
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Colgate and Dollar is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree 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 Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Dollar Tree go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Dollar Tree
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.42 times more return on investment than Dollar Tree. However, Colgate Palmolive is 2.38 times less risky than Dollar Tree. It trades about 0.06 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.05 per unit of risk. If you would invest 7,019 in Colgate Palmolive on November 1, 2024 and sell it today you would earn a total of 2,074 from holding Colgate Palmolive or generate 29.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Colgate Palmolive vs. Dollar Tree
Performance |
| Timeline |
| Colgate Palmolive |
| Dollar Tree |
Colgate Palmolive and Dollar Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Dollar Tree
The main advantage of trading using opposite Colgate Palmolive and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Dollar Tree 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 Dollar Tree will offset losses from the drop in Dollar Tree's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Dollar Tree vs. BJs Wholesale Club | Dollar Tree vs. Walmart | Dollar Tree vs. Target | Dollar Tree vs. Dollar General |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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