Correlation Between Colgate Palmolive and Honest
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Honest 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 Honest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Honest Company, you can compare the effects of market volatilities on Colgate Palmolive and Honest 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 Honest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Honest.
Diversification Opportunities for Colgate Palmolive and Honest
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Colgate and Honest is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Honest Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honest Company 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 Honest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honest Company has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Honest go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Honest
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the Honest. But the stock apears to be less risky and, when comparing its historical volatility, Colgate Palmolive is 3.27 times less risky than Honest. The stock trades about -0.27 of its potential returns per unit of risk. The Honest Company is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 658.00 in Honest Company on October 20, 2024 and sell it today you would earn a total of 0.00 from holding Honest Company or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Honest Company
Performance |
| Timeline |
| Colgate Palmolive |
| Honest Company |
Colgate Palmolive and Honest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Honest
The main advantage of trading using opposite Colgate Palmolive and Honest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Honest 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 Honest will offset losses from the drop in Honest's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Honest vs. Estee Lauder Companies | Honest vs. Hims Hers Health | Honest vs. Procter Gamble | Honest vs. Coty 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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