Correlation Between Teladoc and Colgate Palmolive

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

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

Diversification Opportunities for Teladoc and Colgate Palmolive

-0.83

Correlation Coefficient

Teladoc  Colgate Palmolive

Pay attention - limited upside

The 3 months correlation between Teladoc and Colgate is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Teladoc and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Teladoc 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 Teladoc 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 Teladoc i.e., Teladoc and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Teladoc and Colgate Palmolive

Given the investment horizon of 90 days Teladoc is expected to under-perform the Colgate Palmolive. In addition to that, Teladoc is 4.15 times more volatile than Colgate Palmolive. It trades about -0.06 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about 0.08 per unit of volatility. If you would invest  7,651  in Colgate Palmolive on January 18, 2024 and sell it today you would earn a total of  1,024  from holding Colgate Palmolive or generate 13.38% return on investment over 90 days.

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

Teladoc  vs.  Colgate Palmolive

Teladoc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teladoc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Colgate Palmolive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 11 (%) 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 May 2024.

Pair Trading with Teladoc and Colgate Palmolive

The main advantage of trading using opposite Teladoc and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teladoc 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.

The idea behind Teladoc and Colgate Palmolive 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..