Correlation Between Colgate Palmolive and Rocky Mountain
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Rocky Mountain 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 Rocky Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Rocky Mountain Chocolate, you can compare the effects of market volatilities on Colgate Palmolive and Rocky Mountain 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 Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Rocky Mountain.
Diversification Opportunities for Colgate Palmolive and Rocky Mountain
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Colgate and Rocky is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Rocky Mountain go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Rocky Mountain
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 2.23 times less return on investment than Rocky Mountain. But when comparing it to its historical volatility, Colgate Palmolive is 2.12 times less risky than Rocky Mountain. It trades about 0.08 of its potential returns per unit of risk. Rocky Mountain Chocolate is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 270.00 in Rocky Mountain Chocolate on August 30, 2024 and sell it today you would earn a total of 12.00 from holding Rocky Mountain Chocolate or generate 4.44% 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. Rocky Mountain Chocolate
Performance |
| Timeline |
| Colgate Palmolive |
| Rocky Mountain Chocolate |
Colgate Palmolive and Rocky Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Rocky Mountain
The main advantage of trading using opposite Colgate Palmolive and Rocky Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Rocky Mountain 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 Rocky Mountain will offset losses from the drop in Rocky Mountain's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Rocky Mountain vs. Mondelez International | Rocky Mountain vs. Tootsie Roll Industries | Rocky Mountain vs. Chocoladefabriken Lindt Sprngli | Rocky Mountain vs. Barry Callebaut AG |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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