Correlation Between Kimberly Clark and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Kimberly Clark 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 Kimberly Clark and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kimberly Clark de Mexico and Colgate Palmolive, you can compare the effects of market volatilities on Kimberly Clark 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 Kimberly Clark with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimberly Clark and Colgate Palmolive.
Diversification Opportunities for Kimberly Clark and Colgate Palmolive
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kimberly and Colgate is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark de Mexico and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Kimberly Clark 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 Kimberly Clark de Mexico 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 Kimberly Clark i.e., Kimberly Clark and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Kimberly Clark and Colgate Palmolive
Assuming the 90 days horizon Kimberly Clark de Mexico is expected to generate 0.89 times more return on investment than Colgate Palmolive. However, Kimberly Clark de Mexico is 1.12 times less risky than Colgate Palmolive. It trades about -0.13 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.13 per unit of risk. If you would invest 714.00 in Kimberly Clark de Mexico on August 24, 2024 and sell it today you would lose (29.00) from holding Kimberly Clark de Mexico or give up 4.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Kimberly Clark de Mexico vs. Colgate Palmolive
Performance |
| Timeline |
| Kimberly Clark de |
| Colgate Palmolive |
Kimberly Clark and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kimberly Clark and Colgate Palmolive
The main advantage of trading using opposite Kimberly Clark and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimberly Clark 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.| Kimberly Clark vs. Reckitt Benckiser Group | Kimberly Clark vs. Church Dwight | Kimberly Clark vs. LOreal Co ADR | Kimberly Clark vs. Shiseido Company |
| Colgate Palmolive vs. Eshallgo Class A | Colgate Palmolive vs. Amtech Systems | Colgate Palmolive vs. Gold Fields Ltd | Colgate Palmolive vs. Aegean Airlines SA |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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