Correlation Between Acme United and Colgate Palmolive

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

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

Diversification Opportunities for Acme United and Colgate Palmolive

0.11

Correlation Coefficient

Acme United  Colgate Palmolive

Average diversification

The 3 months correlation between Acme and Colgate is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Acme United 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 Acme United 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 Acme United i.e., Acme United and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Acme United and Colgate Palmolive

Considering the 90-day investment horizon Acme United is expected to generate 2.62 times more return on investment than Colgate Palmolive. However, Acme United is 2.62 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 0.04 per unit of risk. If you would invest  2,939  in Acme United on April 24, 2025 and sell it today you would earn a total of  1,342  from holding Acme United or generate 45.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Acme United  vs.  Colgate Palmolive

Acme United

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Acme United is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Colgate Palmolive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colgate Palmolive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Colgate Palmolive is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Acme United and Colgate Palmolive

The main advantage of trading using opposite Acme United and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acme United 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 Acme United 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.