Correlation Between Colgate Palmolive and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Reckitt Benckiser 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 Reckitt Benckiser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Reckitt Benckiser Group, you can compare the effects of market volatilities on Colgate Palmolive and Reckitt Benckiser 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 Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Reckitt Benckiser.
Diversification Opportunities for Colgate Palmolive and Reckitt Benckiser
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Colgate and Reckitt is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Reckitt Benckiser
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.72 times more return on investment than Reckitt Benckiser. However, Colgate Palmolive is 1.39 times less risky than Reckitt Benckiser. It trades about -0.02 of its potential returns per unit of risk. Reckitt Benckiser Group is currently generating about -0.05 per unit of risk. If you would invest 9,561 in Colgate Palmolive on August 26, 2024 and sell it today you would lose (69.00) from holding Colgate Palmolive or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Reckitt Benckiser Group
Performance |
| Timeline |
| Colgate Palmolive |
| Reckitt Benckiser |
Colgate Palmolive and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Reckitt Benckiser
The main advantage of trading using opposite Colgate Palmolive and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Reckitt Benckiser vs. LOreal Co ADR | Reckitt Benckiser vs. Unilever PLC ADR | Reckitt Benckiser vs. Kimberly Clark | Reckitt Benckiser vs. The Clorox |
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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