Correlation Between Colgate Palmolive and Dost Steels
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Dost Steels 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 Dost Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive Pakistan and Dost Steels, you can compare the effects of market volatilities on Colgate Palmolive and Dost Steels 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 Dost Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Dost Steels.
Diversification Opportunities for Colgate Palmolive and Dost Steels
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Dost is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive Pakistan and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels 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 Pakistan are associated (or correlated) with Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Dost Steels go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Dost Steels
Assuming the 90 days trading horizon Colgate Palmolive Pakistan is expected to generate 0.69 times more return on investment than Dost Steels. However, Colgate Palmolive Pakistan is 1.44 times less risky than Dost Steels. It trades about 0.24 of its potential returns per unit of risk. Dost Steels is currently generating about 0.09 per unit of risk. If you would invest 116,576 in Colgate Palmolive Pakistan on September 12, 2024 and sell it today you would earn a total of 34,829 from holding Colgate Palmolive Pakistan or generate 29.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive Pakistan vs. Dost Steels
Performance |
| Timeline |
| Colgate Palmolive |
| Dost Steels |
Colgate Palmolive and Dost Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Dost Steels
The main advantage of trading using opposite Colgate Palmolive and Dost Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Dost Steels 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 Dost Steels will offset losses from the drop in Dost Steels' long position.| Colgate Palmolive vs. Matco Foods | Colgate Palmolive vs. Roshan Packages | Colgate Palmolive vs. Pakistan Aluminium Beverage | Colgate Palmolive vs. Air Link Communication |
| Dost Steels vs. Masood Textile Mills | Dost Steels vs. Fauji Foods | Dost Steels vs. KSB Pumps | Dost Steels vs. Mari Petroleum |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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