Correlation Between Acme United and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Acme United 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 Acme United and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acme United and Colgate Palmolive, you can compare the effects of market volatilities on Acme United 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 Acme United with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acme United and Colgate Palmolive.
Diversification Opportunities for Acme United and Colgate Palmolive
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Acme and Colgate is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Acme United 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 Acme United 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 Acme United i.e., Acme United and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Acme United and Colgate Palmolive
Considering the 90-day investment horizon Acme United is expected to under-perform the Colgate Palmolive. In addition to that, Acme United is 5.78 times more volatile than Colgate Palmolive. It trades about -0.05 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about 0.11 per unit of volatility. If you would invest 8,461 in Colgate Palmolive on January 19, 2024 and sell it today you would earn a total of 214.00 from holding Colgate Palmolive or generate 2.53% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 97.62% |
Values | Daily Returns |
Acme United vs. Colgate Palmolive
Performance |
Timeline |
Acme United |
Colgate Palmolive |
Acme United and Colgate Palmolive Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Acme United and Colgate Palmolive
The main advantage of trading using opposite Acme United and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acme United 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.Acme United vs. Mannatech Incorporated | Acme United vs. Natura Co Holding | Acme United vs. European Wax Center | Acme United vs. Inter Parfums |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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