Correlation Between Colgate Palmolive and Tilray

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

By analyzing existing cross correlation between Colgate Palmolive and Tilray Inc, you can compare the effects of market volatilities on Colgate Palmolive and Tilray 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 Tilray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Tilray.

Diversification Opportunities for Colgate Palmolive and Tilray

0.23

Correlation Coefficient

Colgate Palmolive  Tilray

Modest diversification

The 3 months correlation between Colgate and Tilray is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Tilray Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tilray Inc 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 Tilray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tilray Inc has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Tilray go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Tilray

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 3.22 times less return on investment than Tilray. But when comparing it to its historical volatility, Colgate Palmolive is 12.49 times less risky than Tilray. It trades about 0.25 of its potential returns per unit of risk. Tilray Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  192.00  in Tilray Inc on February 15, 2024 and sell it today you would earn a total of  17.00  from holding Tilray Inc or generate 8.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Colgate Palmolive  vs.  Tilray Inc

Colgate Palmolive

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Colgate Palmolive disclosed solid returns over the last few months and may actually be approaching a breakup point.

Tilray Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tilray Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Tilray showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colgate Palmolive and Tilray

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

The idea behind Colgate Palmolive and Tilray Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.