Correlation Between OFFICE DEPOT and Colgate Palmolive

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Can any of the company-specific risk be diversified away by investing in both OFFICE DEPOT 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 OFFICE DEPOT and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OFFICE DEPOT and Colgate Palmolive, you can compare the effects of market volatilities on OFFICE DEPOT 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 OFFICE DEPOT with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFFICE DEPOT and Colgate Palmolive.

Diversification Opportunities for OFFICE DEPOT and Colgate Palmolive

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between OFFICE and Colgate is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding OFFICE DEPOT and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and OFFICE DEPOT 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 OFFICE DEPOT 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 OFFICE DEPOT i.e., OFFICE DEPOT and Colgate Palmolive go up and down completely randomly.

Pair Corralation between OFFICE DEPOT and Colgate Palmolive

If you would invest  1,920  in OFFICE DEPOT on October 10, 2024 and sell it today you would earn a total of  0.00  from holding OFFICE DEPOT or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

OFFICE DEPOT  vs.  Colgate Palmolive

 Performance 
       Timeline  
OFFICE DEPOT 

Risk-Adjusted Performance

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Over the last 90 days OFFICE DEPOT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, OFFICE DEPOT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Colgate Palmolive 

Risk-Adjusted Performance

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Weak
 
Strong
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 unsteady 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.

OFFICE DEPOT and Colgate Palmolive Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OFFICE DEPOT and Colgate Palmolive

The main advantage of trading using opposite OFFICE DEPOT and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFFICE DEPOT 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 OFFICE DEPOT 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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