Correlation Between Colgate Palmolive and Bunge
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Bunge 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 Colgate Palmolive and Bunge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Bunge Limited, you can compare the effects of market volatilities on Colgate Palmolive and Bunge 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 Colgate Palmolive with a short position of Bunge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Bunge.
Diversification Opportunities for Colgate Palmolive and Bunge
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Colgate and Bunge is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Colgate Palmolive 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 Colgate Palmolive are associated (or correlated) with Bunge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunge Limited has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Bunge go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Bunge
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 1.72 times less return on investment than Bunge. But when comparing it to its historical volatility, Colgate Palmolive is 1.58 times less risky than Bunge. It trades about 0.06 of its potential returns per unit of risk. Bunge Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,011 in Bunge Limited on January 25, 2024 and sell it today you would earn a total of 1,951 from holding Bunge Limited or generate 21.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Colgate Palmolive vs. Bunge Limited
Performance |
| Timeline |
| Colgate Palmolive |
| Bunge Limited |
Colgate Palmolive and Bunge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Bunge
The main advantage of trading using opposite Colgate Palmolive and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Bunge 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 Bunge will offset losses from the drop in Bunge's long position.| Colgate Palmolive vs. Unilever PLC ADR | Colgate Palmolive vs. Estee Lauder Companies | Colgate Palmolive vs. ELF Beauty | Colgate Palmolive vs. Coty Inc |
| Bunge vs. NaturalShrimp | Bunge vs. AgriFORCE Growing Systems | Bunge vs. Atlantic Sapphire ASA | Bunge vs. AgriFORCE Growing Systems |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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