Correlation Between Colgate Palmolive and Boyd Gaming

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

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

Diversification Opportunities for Colgate Palmolive and Boyd Gaming

-0.57

Correlation Coefficient

Colgate Palmolive  Boyd Gaming

Excellent diversification

The 3 months correlation between Colgate and Boyd is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Boyd Gaming go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Boyd Gaming

Assuming the 90 days trading horizon Colgate Palmolive is expected to generate 1.15 times less return on investment than Boyd Gaming. But when comparing it to its historical volatility, Colgate Palmolive is 2.17 times less risky than Boyd Gaming. It trades about 0.11 of its potential returns per unit of risk. Boyd Gaming is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,531  in Boyd Gaming on September 13, 2024 and sell it today you would earn a total of  1,569  from holding Boyd Gaming or generate 28.37% return on investment over 90 days.

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

Colgate Palmolive  vs.  Boyd Gaming

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. In spite of comparatively stable basic indicators, Colgate Palmolive is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Boyd Gaming

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Boyd Gaming unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colgate Palmolive and Boyd Gaming

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

The idea behind Colgate Palmolive and Boyd Gaming 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.