Correlation Between Dow Jones and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Procter Gamble 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 Dow Jones and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and The Procter Gamble, you can compare the effects of market volatilities on Dow Jones and Procter Gamble 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 Dow Jones with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Procter Gamble.
Diversification Opportunities for Dow Jones and Procter Gamble
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Procter is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Dow Jones i.e., Dow Jones and Procter Gamble go up and down completely randomly.
Pair Corralation between Dow Jones and Procter Gamble
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.16 times less return on investment than Procter Gamble. But when comparing it to its historical volatility, Dow Jones Industrial is 1.92 times less risky than Procter Gamble. It trades about 0.1 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,599 in The Procter Gamble on August 27, 2024 and sell it today you would earn a total of 1,737 from holding The Procter Gamble or generate 31.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.95% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Procter Gamble
Performance |
| Timeline |
Dow Jones and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Procter Gamble
Pair trading matchups for Procter Gamble
Pair Trading with Dow Jones and Procter Gamble
The main advantage of trading using opposite Dow Jones and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Procter Gamble vs. Unilever PLC | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Natura Co Holding | Procter Gamble vs. Bombril SA |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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