Correlation Between Colgate Palmolive and ELF Beauty
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and ELF Beauty 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 ELF Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and ELF Beauty, you can compare the effects of market volatilities on Colgate Palmolive and ELF Beauty 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 ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and ELF Beauty.
Diversification Opportunities for Colgate Palmolive and ELF Beauty
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Colgate and ELF is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty 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 ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and ELF Beauty go up and down completely randomly.
Pair Corralation between Colgate Palmolive and ELF Beauty
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the ELF Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Colgate Palmolive is 3.36 times less risky than ELF Beauty. The stock trades about -0.01 of its potential returns per unit of risk. The ELF Beauty is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 11,006 in ELF Beauty on August 27, 2024 and sell it today you would earn a total of 1,987 from holding ELF Beauty or generate 18.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. ELF Beauty
Performance |
| Timeline |
| Colgate Palmolive |
| ELF Beauty |
Colgate Palmolive and ELF Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and ELF Beauty
The main advantage of trading using opposite Colgate Palmolive and ELF Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, ELF Beauty 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 ELF Beauty will offset losses from the drop in ELF Beauty's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| ELF Beauty vs. Procter Gamble | ELF Beauty vs. Colgate Palmolive | ELF Beauty vs. Coty Inc | ELF Beauty vs. Kenvue Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |