Correlation Between Colgate Palmolive and Kimberly Parry

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

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

Diversification Opportunities for Colgate Palmolive and Kimberly Parry

0.45

Correlation Coefficient

Colgate Palmolive  Kimberly Parry

Very weak diversification

The 3 months correlation between Colgate and Kimberly is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Kimberly Parry Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Parry Organics 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 Kimberly Parry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Parry Organics has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Kimberly Parry go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Kimberly Parry

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 5.38 times less return on investment than Kimberly Parry. But when comparing it to its historical volatility, Colgate Palmolive is 12.62 times less risky than Kimberly Parry. It trades about 0.05 of its potential returns per unit of risk. Kimberly Parry Organics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Kimberly Parry Organics on October 27, 2024 and sell it today you would lose (0.02) from holding Kimberly Parry Organics or give up 66.67% of portfolio value over 90 days.

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

Colgate Palmolive  vs.  Kimberly Parry Organics

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 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.

Kimberly Parry Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Parry Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kimberly Parry is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Colgate Palmolive and Kimberly Parry

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

The idea behind Colgate Palmolive and Kimberly Parry Organics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.