Correlation Between Colgate Palmolive and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Lamb Weston 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 Lamb Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Lamb Weston Holdings, you can compare the effects of market volatilities on Colgate Palmolive and Lamb Weston 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 Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Lamb Weston.
Diversification Opportunities for Colgate Palmolive and Lamb Weston
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Colgate and Lamb is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Lamb Weston go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Lamb Weston
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.79 times more return on investment than Lamb Weston. However, Colgate Palmolive is 1.27 times less risky than Lamb Weston. It trades about 0.08 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about 0.0 per unit of risk. If you would invest 9,472 in Colgate Palmolive on August 30, 2024 and sell it today you would earn a total of 204.00 from holding Colgate Palmolive or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Lamb Weston Holdings
Performance |
| Timeline |
| Colgate Palmolive |
| Lamb Weston Holdings |
Colgate Palmolive and Lamb Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Lamb Weston
The main advantage of trading using opposite Colgate Palmolive and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Lamb Weston 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 Lamb Weston will offset losses from the drop in Lamb Weston's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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