Correlation Between Procter Gamble and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Procter Gamble 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 Procter Gamble and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Colgate Palmolive, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Colgate Palmolive.
Diversification Opportunities for Procter Gamble and Colgate Palmolive
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Procter and Colgate is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Procter Gamble 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 Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Procter Gamble and Colgate Palmolive
Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Colgate Palmolive. In addition to that, Procter Gamble is 1.34 times more volatile than Colgate Palmolive. It trades about -0.13 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about -0.13 per unit of volatility. If you would invest 8,835 in Colgate Palmolive on January 20, 2024 and sell it today you would lose (164.00) from holding Colgate Palmolive or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Procter Gamble vs. Colgate Palmolive
Performance |
| Timeline |
| Procter Gamble |
| Colgate Palmolive |
Procter Gamble and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Colgate Palmolive
The main advantage of trading using opposite Procter Gamble and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Estee Lauder Companies | Colgate Palmolive vs. ELF Beauty | Colgate Palmolive vs. Coty Inc |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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