Correlation Between Colgate Palmolive and Kroger

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

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

Diversification Opportunities for Colgate Palmolive and Kroger

0.35

Correlation Coefficient

Colgate Palmolive  Kroger

Weak diversification

The 3 months correlation between Colgate and Kroger is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Kroger go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Kroger

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 2.25 times less return on investment than Kroger. In addition to that, Colgate Palmolive is 1.09 times more volatile than Kroger Company. It trades about 0.04 of its total potential returns per unit of risk. Kroger Company is currently generating about 0.1 per unit of volatility. If you would invest  6,093  in Kroger Company on December 28, 2024 and sell it today you would earn a total of  521.00  from holding Kroger Company or generate 8.55% 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.  Kroger Company

Colgate Palmolive

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Colgate Palmolive is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Kroger Company

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Colgate Palmolive and Kroger

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

The idea behind Colgate Palmolive and Kroger Company 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.