Correlation Between Colgate Palmolive and Unilever Indonesia
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Unilever Indonesia 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 Unilever Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Unilever Indonesia Tbk, you can compare the effects of market volatilities on Colgate Palmolive and Unilever Indonesia 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 Unilever Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Unilever Indonesia.
Diversification Opportunities for Colgate Palmolive and Unilever Indonesia
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Unilever is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Unilever Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Indonesia Tbk 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 Unilever Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever Indonesia Tbk has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Unilever Indonesia go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Unilever Indonesia
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.46 times more return on investment than Unilever Indonesia. However, Colgate Palmolive is 2.17 times less risky than Unilever Indonesia. It trades about 0.13 of its potential returns per unit of risk. Unilever Indonesia Tbk is currently generating about -0.21 per unit of risk. If you would invest 9,333 in Colgate Palmolive on September 2, 2024 and sell it today you would earn a total of 330.00 from holding Colgate Palmolive or generate 3.54% 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. Unilever Indonesia Tbk
Performance |
| Timeline |
| Colgate Palmolive |
| Unilever Indonesia Tbk |
Colgate Palmolive and Unilever Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Unilever Indonesia
The main advantage of trading using opposite Colgate Palmolive and Unilever Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Unilever Indonesia 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 Unilever Indonesia will offset losses from the drop in Unilever Indonesia's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
| Unilever Indonesia vs. European Wax Center | Unilever Indonesia vs. Edgewell Personal Care | Unilever Indonesia vs. Inter Parfums | Unilever Indonesia vs. Mannatech Incorporated |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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