Correlation Between LOral SA and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both LOral SA 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 LOral SA and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOral SA and Colgate Palmolive, you can compare the effects of market volatilities on LOral SA 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 LOral SA with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOral SA and Colgate Palmolive.
Diversification Opportunities for LOral SA and Colgate Palmolive
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between LOral and Colgate is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding LOral SA and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and LOral SA 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 LOral SA 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 LOral SA i.e., LOral SA and Colgate Palmolive go up and down completely randomly.
Pair Corralation between LOral SA and Colgate Palmolive
Assuming the 90 days horizon LOral SA is expected to generate 2.22 times more return on investment than Colgate Palmolive. However, LOral SA is 2.22 times more volatile than Colgate Palmolive. It trades about 0.07 of its potential returns per unit of risk. Colgate Palmolive is currently generating about 0.07 per unit of risk. If you would invest 47,500 in LOral SA on January 25, 2024 and sell it today you would earn a total of 1,000.00 from holding LOral SA or generate 2.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
LOral SA vs. Colgate Palmolive
Performance |
Timeline |
LOral SA |
Colgate Palmolive |
LOral SA and Colgate Palmolive Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LOral SA and Colgate Palmolive
The main advantage of trading using opposite LOral SA and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOral SA 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.LOral SA vs. LOreal Co ADR | LOral SA vs. Unilever PLC ADR | LOral SA vs. Kimberly Clark | LOral SA vs. The Clorox |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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