Correlation Between Colgate Palmolive and LOREAL ADR
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and LOREAL ADR 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 LOREAL ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and LOREAL ADR 15EO, you can compare the effects of market volatilities on Colgate Palmolive and LOREAL ADR 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 LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and LOREAL ADR.
Diversification Opportunities for Colgate Palmolive and LOREAL ADR
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Colgate and LOREAL is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO 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 LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and LOREAL ADR go up and down completely randomly.
Pair Corralation between Colgate Palmolive and LOREAL ADR
Assuming the 90 days trading horizon Colgate Palmolive is expected to under-perform the LOREAL ADR. But the stock apears to be less risky and, when comparing its historical volatility, Colgate Palmolive is 1.7 times less risky than LOREAL ADR. The stock trades about -0.04 of its potential returns per unit of risk. The LOREAL ADR 15EO is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,550 in LOREAL ADR 15EO on October 19, 2024 and sell it today you would earn a total of 100.00 from holding LOREAL ADR 15EO or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Colgate Palmolive vs. LOREAL ADR 15EO
Performance |
| Timeline |
| Colgate Palmolive |
| LOREAL ADR 15EO |
Colgate Palmolive and LOREAL ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and LOREAL ADR
The main advantage of trading using opposite Colgate Palmolive and LOREAL ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, LOREAL ADR 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 LOREAL ADR will offset losses from the drop in LOREAL ADR's long position.| Colgate Palmolive vs. DEVRY EDUCATION GRP | Colgate Palmolive vs. Hyrican Informationssysteme Aktiengesellschaft | Colgate Palmolive vs. DATAGROUP SE | Colgate Palmolive vs. Automatic Data Processing |
| LOREAL ADR vs. The Procter Gamble | LOREAL ADR vs. LOral SA | LOREAL ADR vs. LOral SA | LOREAL ADR vs. Unilever Plc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |