Correlation Between Colgate Palmolive and Performance Food
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Performance Food 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 Performance Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Performance Food Group, you can compare the effects of market volatilities on Colgate Palmolive and Performance Food 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 Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Performance Food.
Diversification Opportunities for Colgate Palmolive and Performance Food
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Colgate and Performance is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Performance Food go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Performance Food
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 1.54 times less return on investment than Performance Food. But when comparing it to its historical volatility, Colgate Palmolive is 1.52 times less risky than Performance Food. It trades about 0.06 of its potential returns per unit of risk. Performance Food Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,026 in Performance Food Group on August 24, 2024 and sell it today you would earn a total of 2,733 from holding Performance Food Group or generate 45.35% 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. Performance Food Group
Performance |
| Timeline |
| Colgate Palmolive |
| Performance Food |
Colgate Palmolive and Performance Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Performance Food
The main advantage of trading using opposite Colgate Palmolive and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Performance Food 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 Performance Food will offset losses from the drop in Performance Food's long position.| Colgate Palmolive vs. Eshallgo Class A | Colgate Palmolive vs. Amtech Systems | Colgate Palmolive vs. Gold Fields Ltd | Colgate Palmolive vs. Aegean Airlines SA |
| Performance Food vs. Sysco | Performance Food vs. The Chefs Warehouse | Performance Food vs. United Natural Foods | Performance Food vs. Calavo Growers |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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