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 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
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Kimberly and Colgate is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark 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 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
Considering the 90-day investment horizon Kimberly Clark is expected to generate 6.96 times less return on investment than Colgate Palmolive. But when comparing it to its historical volatility, Kimberly Clark is 1.11 times less risky than Colgate Palmolive. It trades about 0.0 of its potential returns per unit of risk. Colgate Palmolive is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,040 in Colgate Palmolive on November 1, 2024 and sell it today you would earn a total of 52.50 from holding Colgate Palmolive or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kimberly Clark vs. Colgate Palmolive
Performance |
| Timeline |
| Kimberly Clark |
| 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. Colgate Palmolive | Kimberly Clark vs. Church Dwight | Kimberly Clark vs. Unilever PLC ADR | Kimberly Clark vs. Procter Gamble |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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