Correlation Between Colgate Palmolive and Bellring Brands

Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Bellring Brands 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 Bellring Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Colgate Palmolive and Bellring Brands LLC, you can compare the effects of market volatilities on Colgate Palmolive and Bellring Brands 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 Bellring Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Bellring Brands.

Diversification Opportunities for Colgate Palmolive and Bellring Brands

0.01

Correlation Coefficient

Colgate Palmolive  Bellring Brands

Significant diversification

The 3 months correlation between Colgate and Bellring is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Bellring Brands LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellring Brands LLC 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 Bellring Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellring Brands LLC has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Bellring Brands go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Bellring Brands

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 1.13 times less return on investment than Bellring Brands. But when comparing it to its historical volatility, Colgate Palmolive is 2.16 times less risky than Bellring Brands. It trades about 0.22 of its potential returns per unit of risk. Bellring Brands LLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,510  in Bellring Brands LLC on February 7, 2024 and sell it today you would earn a total of  1,232  from holding Bellring Brands LLC or generate 27.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Colgate Palmolive  vs.  Bellring Brands LLC

Colgate Palmolive

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Colgate Palmolive may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Bellring Brands LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bellring Brands LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Bellring Brands is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Colgate Palmolive and Bellring Brands

The main advantage of trading using opposite Colgate Palmolive and Bellring Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Bellring Brands 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 Bellring Brands will offset losses from the drop in Bellring Brands' long position.

The idea behind Colgate Palmolive and Bellring Brands LLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.