Correlation Between Colgate Palmolive and Kenvue

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

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

Diversification Opportunities for Colgate Palmolive and Kenvue

0.68

Correlation Coefficient

Colgate Palmolive  Kenvue

Poor diversification

The 3 months correlation between Colgate and Kenvue is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Kenvue go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Kenvue

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 3.07 times less return on investment than Kenvue. In addition to that, Colgate Palmolive is 1.08 times more volatile than Kenvue Inc. It trades about 0.04 of its total potential returns per unit of risk. Kenvue Inc is currently generating about 0.14 per unit of volatility. If you would invest  2,097  in Kenvue Inc on December 29, 2024 and sell it today you would earn a total of  253.00  from holding Kenvue Inc or generate 12.06% return on investment over 90 days.

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

Colgate Palmolive  vs.  Kenvue Inc

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.

Kenvue Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenvue Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Kenvue may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Colgate Palmolive and Kenvue

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

The idea behind Colgate Palmolive and Kenvue Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.