Correlation Between ESGL Holdings and COLGATE

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

By analyzing existing cross correlation between ESGL Holdings Limited and COLGATE PALMOLIVE MEDIUM TERM, you can compare the effects of market volatilities on ESGL Holdings and COLGATE 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 ESGL Holdings with a short position of COLGATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESGL Holdings and COLGATE.

Diversification Opportunities for ESGL Holdings and COLGATE

-0.78

Correlation Coefficient

ESGL Holdings  COLGATE

Pay attention - limited upside

The 3 months correlation between ESGL and COLGATE is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ESGL Holdings Limited and COLGATE PALMOLIVE MEDIUM TERM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLGATE PALMOLIVE and ESGL Holdings 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 ESGL Holdings Limited are associated (or correlated) with COLGATE. 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 ESGL Holdings i.e., ESGL Holdings and COLGATE go up and down completely randomly.

Pair Corralation between ESGL Holdings and COLGATE

Assuming the 90 days horizon ESGL Holdings Limited is expected to generate 178.73 times more return on investment than COLGATE. However, ESGL Holdings is 178.73 times more volatile than COLGATE PALMOLIVE MEDIUM TERM. It trades about 0.17 of its potential returns per unit of risk. COLGATE PALMOLIVE MEDIUM TERM is currently generating about -0.01 per unit of risk. If you would invest  0.39  in ESGL Holdings Limited on September 25, 2024 and sell it today you would earn a total of  1.21  from holding ESGL Holdings Limited or generate 310.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

ESGL Holdings Limited  vs.  COLGATE PALMOLIVE MEDIUM TERM

ESGL Holdings Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

COLGATE PALMOLIVE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COLGATE PALMOLIVE MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COLGATE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ESGL Holdings and COLGATE

The main advantage of trading using opposite ESGL Holdings and COLGATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESGL Holdings position performs unexpectedly, COLGATE 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 will offset losses from the drop in COLGATE's long position.

The idea behind ESGL Holdings Limited and COLGATE PALMOLIVE MEDIUM TERM 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.