Correlation Between Colgate Palmolive and COPLAND ROAD

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

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

Diversification Opportunities for Colgate Palmolive and COPLAND ROAD

0.08

Correlation Coefficient

Colgate Palmolive  COPLAND ROAD

Significant diversification

The 3 months correlation between Colgate and COPLAND is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and COPLAND ROAD CAPITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COPLAND ROAD CAPITAL 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 COPLAND ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COPLAND ROAD CAPITAL has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and COPLAND ROAD go up and down completely randomly.

Pair Corralation between Colgate Palmolive and COPLAND ROAD

Assuming the 90 days horizon Colgate Palmolive is expected to under-perform the COPLAND ROAD. But the stock apears to be less risky and, when comparing its historical volatility, Colgate Palmolive is 2.88 times less risky than COPLAND ROAD. The stock trades about -0.22 of its potential returns per unit of risk. The COPLAND ROAD CAPITAL is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,275  in COPLAND ROAD CAPITAL on October 9, 2024 and sell it today you would earn a total of  545.00  from holding COPLAND ROAD CAPITAL or generate 12.75% return on investment over 90 days.

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

Colgate Palmolive  vs.  COPLAND ROAD CAPITAL

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 uncertain 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.

COPLAND ROAD CAPITAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COPLAND ROAD CAPITAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, COPLAND ROAD reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colgate Palmolive and COPLAND ROAD

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

The idea behind Colgate Palmolive and COPLAND ROAD CAPITAL 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.