Correlation Between Dupont De and Colgate Palmolive

Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Colgate Palmolive, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Colgate Palmolive.

Diversification Opportunities for Dupont De and Colgate Palmolive

-0.2

Correlation Coefficient

Dupont De  Colgate Palmolive

Good diversification

The 3 months correlation between Dupont and Colgate is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Dupont De and Colgate Palmolive

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 1.47 times more return on investment than Colgate Palmolive. However, Dupont De is 1.47 times more volatile than Colgate Palmolive. It trades about 0.04 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.11 per unit of risk. If you would invest  8,133  in Dupont De Nemours on September 4, 2024 and sell it today you would earn a total of  239.00  from holding Dupont De Nemours or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Dupont De Nemours  vs.  Colgate Palmolive

Dupont De Nemours

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Colgate Palmolive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colgate Palmolive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Dupont De and Colgate Palmolive

The main advantage of trading using opposite Dupont De and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.

The idea behind Dupont De Nemours and Colgate Palmolive pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.