Correlation Between Colgate Palmolive and Kimberly Clark

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Can any of the company-specific risk be diversified away by investing in both Colgate Palmolive and Kimberly Clark 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 Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Colgate Palmolive and Kimberly Clark, you can compare the effects of market volatilities on Colgate Palmolive and Kimberly Clark 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 Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colgate Palmolive and Kimberly Clark.

Diversification Opportunities for Colgate Palmolive and Kimberly Clark

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Colgate and Kimberly is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Colgate-Palmolive and Kimberly-Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly-Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly-Clark has no effect on the direction of Colgate Palmolive i.e., Colgate Palmolive and Kimberly Clark go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Kimberly Clark

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 0.94 times more return on investment than Kimberly Clark. However, Colgate Palmolive is 1.06 times less risky than Kimberly Clark. It trades about 0.04 of its potential returns per unit of risk. Kimberly Clark is currently generating about 0.02 per unit of risk. If you would invest  7,652  in Colgate Palmolive on December 30, 2023 and sell it today you would earn a total of  1,353  from holding Colgate Palmolive or generate 17.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Colgate-Palmolive  vs.  Kimberly-Clark

 Performance 
       Timeline  
Colgate-Palmolive 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Colgate Palmolive may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Kimberly-Clark 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Kimberly Clark may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Colgate Palmolive and Kimberly Clark Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Colgate Palmolive and Kimberly Clark

The main advantage of trading using opposite Colgate Palmolive and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.
The idea behind Colgate Palmolive and Kimberly Clark 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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