Correlation Between Colgate Palmolive and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Estee Lauder 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 Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Estee Lauder Companies, you can compare the effects of market volatilities on Colgate Palmolive and Estee Lauder 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 Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Estee Lauder.
Diversification Opportunities for Colgate Palmolive and Estee Lauder
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Colgate and Estee is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies 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 Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Estee Lauder go up and down completely randomly.
Pair Corralation between Colgate Palmolive and Estee Lauder
Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.3 times more return on investment than Estee Lauder. However, Colgate Palmolive is 3.3 times less risky than Estee Lauder. It trades about 0.22 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.06 per unit of risk. If you would invest 7,506 in Colgate Palmolive on February 10, 2024 and sell it today you would earn a total of 1,902 from holding Colgate Palmolive or generate 25.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Colgate Palmolive vs. Estee Lauder Companies
Performance |
| Timeline |
| Colgate Palmolive |
| Estee Lauder Companies |
Colgate Palmolive and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Colgate Palmolive and Estee Lauder
The main advantage of trading using opposite Colgate Palmolive and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Estee Lauder 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 Estee Lauder will offset losses from the drop in Estee Lauder's long position.| Colgate Palmolive vs. Kimberly Clark | Colgate Palmolive vs. Reading International B | Colgate Palmolive vs. Frontier Energy Corp | Colgate Palmolive vs. Merck Company |
| Estee Lauder vs. Kimberly Clark | Estee Lauder vs. Reading International B | Estee Lauder vs. Frontier Energy Corp | Estee Lauder vs. Merck Company |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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