Correlation Between Shiseido Company and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Shiseido Company 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 Shiseido Company and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shiseido Company and Colgate Palmolive, you can compare the effects of market volatilities on Shiseido Company 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 Shiseido Company with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiseido Company and Colgate Palmolive.
Diversification Opportunities for Shiseido Company and Colgate Palmolive
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shiseido and Colgate is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Shiseido Company 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 Shiseido Company 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 Shiseido Company i.e., Shiseido Company and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Shiseido Company and Colgate Palmolive
Assuming the 90 days horizon Shiseido Company is expected to generate 1.79 times more return on investment than Colgate Palmolive. However, Shiseido Company is 1.79 times more volatile than Colgate Palmolive. It trades about 0.05 of its potential returns per unit of risk. Colgate Palmolive is currently generating about 0.04 per unit of risk. If you would invest 1,793 in Shiseido Company on December 28, 2024 and sell it today you would earn a total of 118.00 from holding Shiseido Company or generate 6.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Shiseido Company vs. Colgate Palmolive
Performance |
Timeline |
Shiseido Company |
Colgate Palmolive |
Shiseido Company and Colgate Palmolive Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Shiseido Company and Colgate Palmolive
The main advantage of trading using opposite Shiseido Company and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shiseido Company 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.Shiseido Company vs. Reckitt Benckiser Group | Shiseido Company vs. Church Dwight | Shiseido Company vs. Kimberly Clark de Mexico | Shiseido Company vs. LOreal Co ADR |
Colgate Palmolive vs. The Clorox | Colgate Palmolive vs. Procter Gamble | Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Church Dwight |
Check out your portfolio center.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.
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