Correlation Between Colgate Palmolive and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Procter Gamble 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 Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Procter Gamble, you can compare the effects of market volatilities on Colgate Palmolive and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Procter Gamble.
Diversification Opportunities for Colgate Palmolive and Procter Gamble
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Procter is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Procter Gamble go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Procter Gamble
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the Procter Gamble. In addition to that, Colgate Palmolive is 1.21 times more volatile than Procter Gamble. It trades about -0.13 of its total potential returns per unit of risk. Procter Gamble is currently generating about 0.05 per unit of volatility. If you would invest 16,818 in Procter Gamble on August 23, 2024 and sell it today you would earn a total of 457.00 from holding Procter Gamble or generate 2.72% 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. Procter Gamble
Performance |
| Timeline |
| Colgate Palmolive |
| Procter Gamble |
Colgate Palmolive and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Procter Gamble
The main advantage of trading using opposite Colgate Palmolive and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Procter Gamble vs. Honest Company | Procter Gamble vs. Hims Hers Health | Procter Gamble vs. Kimberly Clark | Procter Gamble vs. Colgate Palmolive |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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