Correlation Between Colgate Palmolive and Consumer Products
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Consumer Products 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 Consumer Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Consumer Products Fund, you can compare the effects of market volatilities on Colgate Palmolive and Consumer Products 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 Consumer Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Consumer Products.
Diversification Opportunities for Colgate Palmolive and Consumer Products
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Colgate and CONSUMER is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products 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 Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Consumer Products go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Consumer Products
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 1.07 times less return on investment than Consumer Products. In addition to that, Colgate Palmolive is 2.46 times more volatile than Consumer Products Fund. It trades about 0.12 of its total potential returns per unit of risk. Consumer Products Fund is currently generating about 0.31 per unit of volatility. If you would invest 3,179 in Consumer Products Fund on September 1, 2024 and sell it today you would earn a total of 117.00 from holding Consumer Products Fund or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Colgate Palmolive vs. Consumer Products Fund
Performance |
| Timeline |
| Colgate Palmolive |
| Consumer Products |
Colgate Palmolive and Consumer Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Consumer Products
The main advantage of trading using opposite Colgate Palmolive and Consumer Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Consumer Products 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 Consumer Products will offset losses from the drop in Consumer Products' long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Consumer Products vs. Basic Materials Fund | Consumer Products vs. Nasdaq 100 Fund Class | Consumer Products vs. Health Care Fund | Consumer Products vs. Energy Fund Class |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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