Correlation Between Colgate Palmolive and Banco Do
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Banco Do 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 Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Banco do Estado, you can compare the effects of market volatilities on Colgate Palmolive and Banco Do 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 Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Banco Do.
Diversification Opportunities for Colgate Palmolive and Banco Do
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Banco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado 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 Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Estado has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Banco Do go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Banco Do
Assuming the 90 days trading horizon Colgate Palmolive is expected to generate 1.47 times more return on investment than Banco Do. However, Colgate Palmolive is 1.47 times more volatile than Banco do Estado. It trades about 0.04 of its potential returns per unit of risk. Banco do Estado is currently generating about -0.3 per unit of risk. If you would invest 7,832 in Colgate Palmolive on August 27, 2024 and sell it today you would earn a total of 80.00 from holding Colgate Palmolive or generate 1.02% 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. Banco do Estado
Performance |
| Timeline |
| Colgate Palmolive |
| Banco do Estado |
Colgate Palmolive and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Banco Do
The main advantage of trading using opposite Colgate Palmolive and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Banco Do 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 Banco Do will offset losses from the drop in Banco Do's long position.| Colgate Palmolive vs. The Procter Gamble | Colgate Palmolive vs. Natura Co Holding | Colgate Palmolive vs. Bombril SA | Colgate Palmolive vs. Mundial SA |
| Banco Do vs. Banco do Estado | Banco Do vs. Banestes SA | Banco Do vs. Banco do Estado | Banco Do vs. Banco Santander SA |
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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