Correlation Between Colgate Palmolive and Este Lauder
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Este Lauder 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 Este Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and The Este Lauder, you can compare the effects of market volatilities on Colgate Palmolive and Este Lauder 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 Este Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Este Lauder.
Diversification Opportunities for Colgate Palmolive and Este Lauder
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Colgate and Este is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Este Lauder go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Este Lauder
Assuming the 90 days trading horizon Colgate Palmolive is expected to generate 3.27 times less return on investment than Este Lauder. But when comparing it to its historical volatility, Colgate Palmolive is 2.0 times less risky than Este Lauder. It trades about 0.17 of its potential returns per unit of risk. The Este Lauder is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,595 in The Este Lauder on September 5, 2024 and sell it today you would earn a total of 305.00 from holding The Este Lauder or generate 19.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Colgate Palmolive vs. The Este Lauder
Performance |
| Timeline |
| Colgate Palmolive |
| Este Lauder |
Colgate Palmolive and Este Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Este Lauder
The main advantage of trading using opposite Colgate Palmolive and Este Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Este Lauder 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 Este Lauder will offset losses from the drop in Este Lauder's long position.| Colgate Palmolive vs. Unity Software | Colgate Palmolive vs. UnitedHealth Group Incorporated | Colgate Palmolive vs. Bemobi Mobile Tech | Colgate Palmolive vs. Costco Wholesale |
| Este Lauder vs. Align Technology | Este Lauder vs. STMicroelectronics NV | Este Lauder vs. Brpr Corporate Offices | Este Lauder vs. Mitsubishi UFJ Financial |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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