Correlation Between Colgate Palmolive and Kellanova

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

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

Diversification Opportunities for Colgate Palmolive and Kellanova

-0.72

Correlation Coefficient

Colgate Palmolive  Kellanova

Pay attention - limited upside

The 3 months correlation between Colgate and Kellanova is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Kellanova go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Kellanova

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to under-perform the Kellanova. In addition to that, Colgate Palmolive is 9.66 times more volatile than Kellanova. It trades about -0.02 of its total potential returns per unit of risk. Kellanova is currently generating about 0.34 per unit of volatility. If you would invest  8,194  in Kellanova on December 1, 2024 and sell it today you would earn a total of  96.00  from holding Kellanova or generate 1.17% return on investment over 90 days.

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

Colgate Palmolive  vs.  Kellanova

Colgate Palmolive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colgate Palmolive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kellanova

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Colgate Palmolive and Kellanova

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

The idea behind Colgate Palmolive and Kellanova 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.