Correlation Between Big Tree and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Big Tree 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 Big Tree and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and Colgate Palmolive, you can compare the effects of market volatilities on Big Tree 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 Big Tree with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and Colgate Palmolive.
Diversification Opportunities for Big Tree and Colgate Palmolive
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Big and Colgate is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Big Tree 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 Big Tree Cloud 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 Big Tree i.e., Big Tree and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Big Tree and Colgate Palmolive
Assuming the 90 days horizon Big Tree Cloud is expected to generate 9.54 times more return on investment than Colgate Palmolive. However, Big Tree is 9.54 times more volatile than Colgate Palmolive. It trades about 0.05 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.01 per unit of risk. If you would invest 4.15 in Big Tree Cloud on August 28, 2024 and sell it today you would lose (0.15) from holding Big Tree Cloud or give up 3.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Tree Cloud vs. Colgate Palmolive
Performance |
| Timeline |
| Big Tree Cloud |
| Colgate Palmolive |
Big Tree and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Tree and Colgate Palmolive
The main advantage of trading using opposite Big Tree and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree 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.| Big Tree vs. Colgate Palmolive | Big Tree vs. Estee Lauder Companies | Big Tree vs. Procter Gamble | Big Tree vs. United Guardian |
| Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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