Correlation Between Colgate Palmolive and Hinopak Motors
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Hinopak Motors 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 Hinopak Motors 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 Hinopak Motors, you can compare the effects of market volatilities on Colgate Palmolive and Hinopak Motors 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 Hinopak Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Hinopak Motors.
Diversification Opportunities for Colgate Palmolive and Hinopak Motors
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Hinopak is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive Pakistan and Hinopak Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hinopak Motors 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 Hinopak Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hinopak Motors has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Hinopak Motors go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Hinopak Motors
Assuming the 90 days trading horizon Colgate Palmolive Pakistan is expected to generate 1.14 times more return on investment than Hinopak Motors. However, Colgate Palmolive is 1.14 times more volatile than Hinopak Motors. It trades about 0.24 of its potential returns per unit of risk. Hinopak Motors is currently generating about 0.03 per unit of risk. If you would invest 130,055 in Colgate Palmolive Pakistan on August 31, 2024 and sell it today you would earn a total of 15,813 from holding Colgate Palmolive Pakistan or generate 12.16% 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. Hinopak Motors
Performance |
| Timeline |
| Colgate Palmolive |
| Hinopak Motors |
Colgate Palmolive and Hinopak Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Hinopak Motors
The main advantage of trading using opposite Colgate Palmolive and Hinopak Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Hinopak Motors 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 Hinopak Motors will offset losses from the drop in Hinopak Motors' long position.| Colgate Palmolive vs. Engro Polymer Chemicals | Colgate Palmolive vs. Pakistan Hotel Developers | Colgate Palmolive vs. United Insurance | Colgate Palmolive vs. Sardar Chemical Industries |
| Hinopak Motors vs. Masood Textile Mills | Hinopak Motors vs. Fauji Foods | Hinopak Motors vs. KSB Pumps | Hinopak Motors 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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