Correlation Between L’Oreal Co and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both L’Oreal Co 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 L’Oreal Co and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LOreal Co ADR and Procter Gamble, you can compare the effects of market volatilities on L’Oreal Co 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 L’Oreal Co with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of L’Oreal Co and Procter Gamble.
Diversification Opportunities for L’Oreal Co and Procter Gamble
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between L’Oreal and Procter is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding LOreal Co ADR and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and L’Oreal Co 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 LOreal Co ADR 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 L’Oreal Co i.e., L’Oreal Co and Procter Gamble go up and down completely randomly.
Pair Corralation between L’Oreal Co and Procter Gamble
Assuming the 90 days horizon L’Oreal Co is expected to generate 1.13 times less return on investment than Procter Gamble. In addition to that, L’Oreal Co is 1.39 times more volatile than Procter Gamble. It trades about 0.14 of its total potential returns per unit of risk. Procter Gamble is currently generating about 0.22 per unit of volatility. If you would invest 15,963 in Procter Gamble on November 7, 2024 and sell it today you would earn a total of 850.00 from holding Procter Gamble or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LOreal Co ADR vs. Procter Gamble
Performance |
| Timeline |
| LOreal Co ADR |
| Procter Gamble |
L’Oreal Co and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L’Oreal Co and Procter Gamble
The main advantage of trading using opposite L’Oreal Co and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L’Oreal Co 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.| L’Oreal Co vs. Unilever PLC | L’Oreal Co vs. Estee Lauder Companies | L’Oreal Co vs. Church Dwight | L’Oreal Co vs. Mannatech Incorporated |
| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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