Correlation Between Colgate Palmolive and Energizer Holdings
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Energizer Holdings 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 Energizer Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Energizer Holdings, you can compare the effects of market volatilities on Colgate Palmolive and Energizer Holdings 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 Energizer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Energizer Holdings.
Diversification Opportunities for Colgate Palmolive and Energizer Holdings
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Colgate and Energizer is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Energizer Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energizer Holdings 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 Energizer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energizer Holdings has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Energizer Holdings go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Energizer Holdings
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the Energizer Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Colgate Palmolive is 1.57 times less risky than Energizer Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Energizer Holdings is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 3,277 in Energizer Holdings on August 27, 2024 and sell it today you would earn a total of 600.00 from holding Energizer Holdings or generate 18.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Energizer Holdings
Performance |
| Timeline |
| Colgate Palmolive |
| Energizer Holdings |
Colgate Palmolive and Energizer Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Energizer Holdings
The main advantage of trading using opposite Colgate Palmolive and Energizer Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Energizer Holdings 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 Energizer Holdings will offset losses from the drop in Energizer Holdings' long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Energizer Holdings vs. Acuity Brands | Energizer Holdings vs. Espey Mfg Electronics | Energizer Holdings vs. Preformed Line Products | Energizer Holdings vs. Kimball Electronics |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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