Correlation Between Costco Wholesale and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale and Colgate Palmolive 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 Costco Wholesale and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Colgate Palmolive, you can compare the effects of market volatilities on Costco Wholesale and Colgate Palmolive 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 Costco Wholesale with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Colgate Palmolive.
Diversification Opportunities for Costco Wholesale and Colgate Palmolive
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Costco and Colgate is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Costco Wholesale 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 Costco Wholesale are associated (or correlated) with Colgate Palmolive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colgate Palmolive has no effect on the direction of Costco Wholesale i.e., Costco Wholesale and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Costco Wholesale and Colgate Palmolive
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.95 times more return on investment than Colgate Palmolive. However, Costco Wholesale is 1.05 times less risky than Colgate Palmolive. It trades about 0.42 of its potential returns per unit of risk. Colgate Palmolive is currently generating about 0.17 per unit of risk. If you would invest 12,880 in Costco Wholesale on September 5, 2024 and sell it today you would earn a total of 2,045 from holding Costco Wholesale or generate 15.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Colgate Palmolive
Performance |
| Timeline |
| Costco Wholesale |
| Colgate Palmolive |
Costco Wholesale and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Colgate Palmolive
The main advantage of trading using opposite Costco Wholesale and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale position performs unexpectedly, Colgate Palmolive 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 Colgate Palmolive will offset losses from the drop in Colgate Palmolive's long position.| Costco Wholesale vs. Agilent Technologies | Costco Wholesale vs. Lupatech SA | Costco Wholesale vs. Livetech da Bahia | Costco Wholesale vs. American Airlines Group |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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