Correlation Between Colgate Palmolive and WD 40
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and WD 40 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 WD 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and WD 40 Company, you can compare the effects of market volatilities on Colgate Palmolive and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and WD 40.
Diversification Opportunities for Colgate Palmolive and WD 40
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Colgate and WDFC is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and WD 40 Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 Company 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 Company has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and WD 40 go up and down completely randomly.
Pair Corralation between Colgate Palmolive and WD 40
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 1.65 times less return on investment than WD 40. But when comparing it to its historical volatility, Colgate Palmolive is 1.22 times less risky than WD 40. It trades about 0.08 of its potential returns per unit of risk. WD 40 Company is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 26,440 in WD 40 Company on August 31, 2024 and sell it today you would earn a total of 987.00 from holding WD 40 Company or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. WD 40 Company
Performance |
| Timeline |
| Colgate Palmolive |
| WD 40 Company |
Colgate Palmolive and WD 40 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and WD 40
The main advantage of trading using opposite Colgate Palmolive and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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