Correlation Between Colgate Palmolive and CA Modas
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and CA Modas 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 CA Modas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and CA Modas SA, you can compare the effects of market volatilities on Colgate Palmolive and CA Modas 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 CA Modas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and CA Modas.
Diversification Opportunities for Colgate Palmolive and CA Modas
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Colgate and CEAB3 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and CA Modas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CA Modas SA 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 CA Modas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CA Modas SA has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and CA Modas go up and down completely randomly.
Pair Corralation between Colgate Palmolive and CA Modas
Assuming the 90 days trading horizon Colgate Palmolive is expected to generate 1.13 times less return on investment than CA Modas. But when comparing it to its historical volatility, Colgate Palmolive is 2.98 times less risky than CA Modas. It trades about 0.04 of its potential returns per unit of risk. CA Modas SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,252 in CA Modas SA on August 27, 2024 and sell it today you would lose (7.00) from holding CA Modas SA or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. CA Modas SA
Performance |
| Timeline |
| Colgate Palmolive |
| CA Modas SA |
Colgate Palmolive and CA Modas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and CA Modas
The main advantage of trading using opposite Colgate Palmolive and CA Modas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, CA Modas 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 CA Modas will offset losses from the drop in CA Modas' long position.| Colgate Palmolive vs. The Procter Gamble | Colgate Palmolive vs. Unilever PLC | Colgate Palmolive vs. Natura Co Holding | Colgate Palmolive vs. Bombril SA |
| CA Modas vs. Marisa Lojas SA | CA Modas vs. Vivara Participaes SA | CA Modas vs. Guararapes Confeces SA | CA Modas vs. Atacado 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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