Correlation Between BLUESCOPE STEEL and Colgate Palmolive

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

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

Diversification Opportunities for BLUESCOPE STEEL and Colgate Palmolive

0.37

Correlation Coefficient

BLUESCOPE STEEL  Colgate Palmolive

Weak diversification

The 3 months correlation between BLUESCOPE and Colgate is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and BLUESCOPE STEEL 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 BLUESCOPE STEEL 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 BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Colgate Palmolive go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and Colgate Palmolive

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to under-perform the Colgate Palmolive. In addition to that, BLUESCOPE STEEL is 2.31 times more volatile than Colgate Palmolive. It trades about -0.01 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about -0.01 per unit of volatility. If you would invest  8,878  in Colgate Palmolive on October 7, 2024 and sell it today you would lose (103.00) from holding Colgate Palmolive or give up 1.16% of portfolio value over 90 days.

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

BLUESCOPE STEEL  vs.  Colgate Palmolive

BLUESCOPE STEEL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLUESCOPE STEEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of comparatively stable basic indicators, Colgate Palmolive is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BLUESCOPE STEEL and Colgate Palmolive

The main advantage of trading using opposite BLUESCOPE STEEL and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLUESCOPE STEEL 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 BLUESCOPE STEEL 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.