Correlation Between Natura Co and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Natura 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 Natura 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 Natura Co Holding and The Procter Gamble, you can compare the effects of market volatilities on Natura 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 Natura Co with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura Co and Procter Gamble.
Diversification Opportunities for Natura Co and Procter Gamble
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Natura and Procter is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Natura 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 Natura Co Holding 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 Natura Co i.e., Natura Co and Procter Gamble go up and down completely randomly.
Pair Corralation between Natura Co and Procter Gamble
Assuming the 90 days trading horizon Natura Co Holding is expected to generate 2.1 times more return on investment than Procter Gamble. However, Natura Co is 2.1 times more volatile than The Procter Gamble. It trades about 0.03 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.06 per unit of risk. If you would invest 1,109 in Natura Co Holding on August 30, 2024 and sell it today you would earn a total of 371.00 from holding Natura Co Holding or generate 33.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Natura Co Holding vs. The Procter Gamble
Performance |
| Timeline |
| Natura Co Holding |
| Procter Gamble |
Natura Co and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natura Co and Procter Gamble
The main advantage of trading using opposite Natura Co and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natura 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.The idea behind Natura Co Holding and The Procter Gamble 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.| Procter Gamble vs. Palantir Technologies | Procter Gamble vs. Warner Music Group | Procter Gamble vs. Align Technology | Procter Gamble vs. Spotify Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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