Correlation Between Aquagold International and Colgate Palmolive

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

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

Diversification Opportunities for Aquagold International and Colgate Palmolive

0.43

Correlation Coefficient

Aquagold International  Colgate Palmolive

Very weak diversification

The 3 months correlation between Aquagold and Colgate is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Aquagold International 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 Aquagold International 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 Aquagold International i.e., Aquagold International and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Aquagold International and Colgate Palmolive

Given the investment horizon of 90 days Aquagold International is expected to generate 50.29 times more return on investment than Colgate Palmolive. However, Aquagold International is 50.29 times more volatile than Colgate Palmolive. It trades about 0.05 of its potential returns per unit of risk. Colgate Palmolive is currently generating about 0.03 per unit of risk. If you would invest  21.00  in Aquagold International on October 9, 2024 and sell it today you would lose (20.96) from holding Aquagold International or give up 99.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Aquagold International  vs.  Colgate Palmolive

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aquagold International and Colgate Palmolive

The main advantage of trading using opposite Aquagold International and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquagold International 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 Aquagold International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.