Correlation Between Lifevantage and Colgate Palmolive

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

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

Diversification Opportunities for Lifevantage and Colgate Palmolive

-0.87

Correlation Coefficient

Lifevantage  Colgate Palmolive

Pay attention - limited upside

The 3 months correlation between Lifevantage and Colgate is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lifevantage and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Lifevantage 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 Lifevantage 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 Lifevantage i.e., Lifevantage and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Lifevantage and Colgate Palmolive

Given the investment horizon of 90 days Lifevantage is expected to generate 4.22 times more return on investment than Colgate Palmolive. However, Lifevantage is 4.22 times more volatile than Colgate Palmolive. It trades about 0.24 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.14 per unit of risk. If you would invest  768.00  in Lifevantage on September 1, 2024 and sell it today you would earn a total of  693.00  from holding Lifevantage or generate 90.23% return on investment over 90 days.

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

Lifevantage  vs.  Colgate Palmolive

Lifevantage

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed 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 weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Lifevantage and Colgate Palmolive

The main advantage of trading using opposite Lifevantage and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifevantage 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 Lifevantage 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.