Correlation Between Coty and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Coty 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 Coty and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Colgate Palmolive, you can compare the effects of market volatilities on Coty 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 Coty with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Colgate Palmolive.
Diversification Opportunities for Coty and Colgate Palmolive
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coty and Colgate is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Coty 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 Coty Inc 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 Coty i.e., Coty and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Coty and Colgate Palmolive
Assuming the 90 days trading horizon Coty Inc is expected to generate 2.5 times more return on investment than Colgate Palmolive. However, Coty is 2.5 times more volatile than Colgate Palmolive. It trades about -0.04 of its potential returns per unit of risk. Colgate Palmolive is currently generating about -0.14 per unit of risk. If you would invest 1,375 in Coty Inc on July 20, 2025 and sell it today you would lose (234.00) from holding Coty Inc or give up 17.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Colgate Palmolive
Performance |
| Timeline |
| Coty Inc |
| Colgate Palmolive |
Coty and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Colgate Palmolive
The main advantage of trading using opposite Coty and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty 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.| Coty vs. PENN Entertainment, | Coty vs. Electronic Arts | Coty vs. The Home Depot | Coty vs. Live Nation Entertainment, |
| Colgate Palmolive vs. Omega Healthcare Investors, | Colgate Palmolive vs. Marfrig Global Foods | Colgate Palmolive vs. Teladoc Health | Colgate Palmolive vs. Tyson Foods |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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