Correlation Between Dollar General and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Dollar General 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 Dollar General and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and Colgate Palmolive, you can compare the effects of market volatilities on Dollar General 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 Dollar General with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Colgate Palmolive.
Diversification Opportunities for Dollar General and Colgate Palmolive
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dollar and Colgate is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Dollar General 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 Dollar General 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 Dollar General i.e., Dollar General and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Dollar General and Colgate Palmolive
Allowing for the 90-day total investment horizon Dollar General is expected to under-perform the Colgate Palmolive. In addition to that, Dollar General is 2.18 times more volatile than Colgate Palmolive. It trades about -0.14 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about 0.04 per unit of volatility. If you would invest 8,839 in Colgate Palmolive on January 26, 2024 and sell it today you would earn a total of 48.00 from holding Colgate Palmolive or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar General vs. Colgate Palmolive
Performance |
| Timeline |
| Dollar General |
| Colgate Palmolive |
Dollar General and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar General and Colgate Palmolive
The main advantage of trading using opposite Dollar General and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General 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.| Dollar General vs. BJs Wholesale Club | Dollar General vs. Big Lots | Dollar General vs. Costco Wholesale Corp | Dollar General vs. Walmart |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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