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
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Colgate and LOREAL is 0.49. 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 generate 0.78 times more return on investment than LOREAL ADR. However, Colgate Palmolive is 1.28 times less risky than LOREAL ADR. It trades about 0.14 of its potential returns per unit of risk. LOREAL ADR 15EO is currently generating about -0.02 per unit of risk. If you would invest 8,649 in Colgate Palmolive on September 13, 2024 and sell it today you would earn a total of 309.00 from holding Colgate Palmolive or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | 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. Boyd Gaming | Colgate Palmolive vs. ANGLER GAMING PLC | Colgate Palmolive vs. Scientific Games | Colgate Palmolive vs. GEELY AUTOMOBILE |
| LOREAL ADR vs. Dave Busters Entertainment | LOREAL ADR vs. TOWNSQUARE MEDIA INC | LOREAL ADR vs. PT Global Mediacom | LOREAL ADR vs. Lendlease Group |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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