Correlation Between COLGATE and ClearOne

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

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

Diversification Opportunities for COLGATE and ClearOne

0.65

Correlation Coefficient

COLGATE  ClearOne

Poor diversification

The 3 months correlation between COLGATE and ClearOne is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding COLGATE PALMOLIVE MEDIUM TERM and ClearOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearOne and COLGATE 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 MEDIUM TERM are associated (or correlated) with ClearOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearOne has no effect on the direction of COLGATE i.e., COLGATE and ClearOne go up and down completely randomly.

Pair Corralation between COLGATE and ClearOne

Assuming the 90 days trading horizon COLGATE PALMOLIVE MEDIUM TERM is expected to generate 0.43 times more return on investment than ClearOne. However, COLGATE PALMOLIVE MEDIUM TERM is 2.33 times less risky than ClearOne. It trades about 0.0 of its potential returns per unit of risk. ClearOne is currently generating about -0.01 per unit of risk. If you would invest  9,079  in COLGATE PALMOLIVE MEDIUM TERM on September 26, 2024 and sell it today you would lose (67.00) from holding COLGATE PALMOLIVE MEDIUM TERM or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

COLGATE PALMOLIVE MEDIUM TERM  vs.  ClearOne

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 current stock price disturbance, may contribute to short-term losses for the investors.

ClearOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ClearOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ClearOne is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with COLGATE and ClearOne

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

The idea behind COLGATE PALMOLIVE MEDIUM TERM and ClearOne 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.

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 Stocks Directory module to find actively traded stocks across global markets.