Correlation Between Colgate Palmolive and Unilever Plc
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Unilever Plc 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 Unilever Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Unilever Plc, you can compare the effects of market volatilities on Colgate Palmolive and Unilever Plc 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 Unilever Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Unilever Plc.
Diversification Opportunities for Colgate Palmolive and Unilever Plc
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Unilever is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Unilever Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Plc 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 Unilever Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever Plc has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Unilever Plc go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Unilever Plc
Assuming the 90 days trading horizon Colgate Palmolive is expected to generate 1.06 times more return on investment than Unilever Plc. However, Colgate Palmolive is 1.06 times more volatile than Unilever Plc. It trades about -0.06 of its potential returns per unit of risk. Unilever Plc is currently generating about -0.07 per unit of risk. If you would invest 9,263 in Colgate Palmolive on September 24, 2024 and sell it today you would lose (395.00) from holding Colgate Palmolive or give up 4.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Colgate Palmolive vs. Unilever Plc
Performance |
Timeline |
Colgate Palmolive |
Unilever Plc |
Colgate Palmolive and Unilever Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Colgate Palmolive and Unilever Plc
The main advantage of trading using opposite Colgate Palmolive and Unilever Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Unilever Plc 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 Unilever Plc will offset losses from the drop in Unilever Plc's long position.Colgate Palmolive vs. The Procter Gamble | Colgate Palmolive vs. LOREAL ADR 15EO | Colgate Palmolive vs. LOral SA | Colgate Palmolive vs. LOral SA |
Unilever Plc vs. The Procter Gamble | Unilever Plc vs. LOREAL ADR 15EO | Unilever Plc vs. LOral SA | Unilever Plc vs. LOral 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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