Correlation Between Colgate Palmolive and Beauty Health
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Beauty Health 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 Beauty Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Beauty Health Co, you can compare the effects of market volatilities on Colgate Palmolive and Beauty Health 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 Beauty Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Beauty Health.
Diversification Opportunities for Colgate Palmolive and Beauty Health
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Colgate and Beauty is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health 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 Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Beauty Health go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Beauty Health
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the Beauty Health. But the stock apears to be less risky and, when comparing its historical volatility, Colgate Palmolive is 4.86 times less risky than Beauty Health. The stock trades about -0.15 of its potential returns per unit of risk. The Beauty Health Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 171.00 in Beauty Health Co on November 2, 2024 and sell it today you would lose (6.00) from holding Beauty Health Co or give up 3.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. Beauty Health Co
Performance |
| Timeline |
| Colgate Palmolive |
| Beauty Health |
Colgate Palmolive and Beauty Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Beauty Health
The main advantage of trading using opposite Colgate Palmolive and Beauty Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Beauty Health 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 Beauty Health will offset losses from the drop in Beauty Health's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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