Correlation Between Helen Of and Colgate Palmolive

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

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

Diversification Opportunities for Helen Of and Colgate Palmolive

0.81

Correlation Coefficient

Helen Of  Colgate Palmolive

Very poor diversification

The 3 months correlation between Helen and Colgate is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Helen of Troy and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Helen Of 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 Helen of Troy 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 Helen Of i.e., Helen Of and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Helen Of and Colgate Palmolive

Given the investment horizon of 90 days Helen of Troy is expected to under-perform the Colgate Palmolive. In addition to that, Helen Of is 1.47 times more volatile than Colgate Palmolive. It trades about -0.18 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about -0.05 per unit of volatility. If you would invest  9,621  in Colgate Palmolive on November 27, 2024 and sell it today you would lose (391.00) from holding Colgate Palmolive or give up 4.06% of portfolio value over 90 days.

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

Helen of Troy  vs.  Colgate Palmolive

Helen of Troy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Helen of Troy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Colgate Palmolive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colgate Palmolive has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Helen Of and Colgate Palmolive

The main advantage of trading using opposite Helen Of and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Helen Of 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 Helen of Troy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.