Correlation Between CANON MARKETING and Colgate Palmolive

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

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

Diversification Opportunities for CANON MARKETING and Colgate Palmolive

0.24

Correlation Coefficient

CANON MARKETING  Colgate Palmolive

Modest diversification

The 3 months correlation between CANON and Colgate is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CANON MARKETING JP and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and CANON MARKETING 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 CANON MARKETING JP 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 CANON MARKETING i.e., CANON MARKETING and Colgate Palmolive go up and down completely randomly.

Pair Corralation between CANON MARKETING and Colgate Palmolive

Assuming the 90 days trading horizon CANON MARKETING JP is expected to generate 0.97 times more return on investment than Colgate Palmolive. However, CANON MARKETING JP is 1.03 times less risky than Colgate Palmolive. It trades about 0.17 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.08 per unit of risk. If you would invest  2,620  in CANON MARKETING JP on October 24, 2024 and sell it today you would earn a total of  340.00  from holding CANON MARKETING JP or generate 12.98% return on investment over 90 days.

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

CANON MARKETING JP  vs.  Colgate Palmolive

CANON MARKETING JP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CANON MARKETING JP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking indicators, CANON MARKETING unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CANON MARKETING and Colgate Palmolive

The main advantage of trading using opposite CANON MARKETING and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CANON MARKETING 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 CANON MARKETING JP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.