Correlation Between Colgate Palmolive and Kraft Heinz
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Kraft Heinz 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 Kraft Heinz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Kraft Heinz Co, you can compare the effects of market volatilities on Colgate Palmolive and Kraft Heinz 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 Kraft Heinz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Kraft Heinz.
Diversification Opportunities for Colgate Palmolive and Kraft Heinz
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Kraft is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Kraft Heinz Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Heinz 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 Kraft Heinz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Heinz has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Kraft Heinz go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Kraft Heinz
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.82 times more return on investment than Kraft Heinz. However, Colgate Palmolive is 1.22 times less risky than Kraft Heinz. It trades about 0.06 of its potential returns per unit of risk. Kraft Heinz Co is currently generating about -0.02 per unit of risk. If you would invest 8,516 in Colgate Palmolive on August 27, 2024 and sell it today you would earn a total of 976.00 from holding Colgate Palmolive or generate 11.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Kraft Heinz Co
Performance |
| Timeline |
| Colgate Palmolive |
| Kraft Heinz |
Colgate Palmolive and Kraft Heinz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Kraft Heinz
The main advantage of trading using opposite Colgate Palmolive and Kraft Heinz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Kraft Heinz 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 Kraft Heinz will offset losses from the drop in Kraft Heinz's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Kraft Heinz vs. Bellring Brands LLC | Kraft Heinz vs. Ingredion Incorporated | Kraft Heinz vs. Nomad Foods | Kraft Heinz vs. Post Holdings |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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