Correlation Between Colgate Palmolive and Consumer Staples
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Consumer Staples 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 Consumer Staples into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Consumer Staples Portfolio, you can compare the effects of market volatilities on Colgate Palmolive and Consumer Staples 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 Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Consumer Staples.
Diversification Opportunities for Colgate Palmolive and Consumer Staples
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Colgate and Consumer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Consumer Staples Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Por 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 Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Por has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Consumer Staples go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Consumer Staples
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 1.21 times more return on investment than Consumer Staples. However, Colgate Palmolive is 1.21 times more volatile than Consumer Staples Portfolio. It trades about 0.03 of its potential returns per unit of risk. Consumer Staples Portfolio is currently generating about 0.02 per unit of risk. If you would invest 9,040 in Colgate Palmolive on November 1, 2024 and sell it today you would earn a total of 52.50 from holding Colgate Palmolive or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Consumer Staples Portfolio
Performance |
| Timeline |
| Colgate Palmolive |
| Consumer Staples Por |
Colgate Palmolive and Consumer Staples Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Consumer Staples
The main advantage of trading using opposite Colgate Palmolive and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Consumer Staples 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 Consumer Staples will offset losses from the drop in Consumer Staples' long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Consumer Staples vs. Ab Bond Inflation | Consumer Staples vs. Rbc Impact Bond | Consumer Staples vs. Ab Global Bond | Consumer Staples vs. Inflation Adjusted Bond Fund |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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