Correlation Between Visa and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Colgate Palmolive, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Colgate Palmolive.
Diversification Opportunities for Visa and Colgate Palmolive
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visa and Colgate is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Visa 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 Visa Class A 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 Visa i.e., Visa and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Visa and Colgate Palmolive
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.76 times more return on investment than Colgate Palmolive. However, Visa Class A is 1.32 times less risky than Colgate Palmolive. It trades about 0.08 of its potential returns per unit of risk. Colgate Palmolive is currently generating about 0.06 per unit of risk. If you would invest 21,523 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 9,947 from holding Visa Class A or generate 46.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.38% |
| Values | Daily Returns |
Visa Class A vs. Colgate Palmolive
Performance |
| Timeline |
| Visa Class A |
| Colgate Palmolive |
Visa and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Colgate Palmolive
The main advantage of trading using opposite Visa and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Colgate Palmolive vs. Sumitomo Mitsui Financial | Colgate Palmolive vs. METISA Metalrgica Timboense | Colgate Palmolive vs. Deutsche Bank Aktiengesellschaft | Colgate Palmolive vs. Brpr Corporate Offices |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |