Correlation Between Procter Gamble and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Chevron Corp 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 Procter Gamble and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble DRC and Chevron Corp CEDEAR, you can compare the effects of market volatilities on Procter Gamble and Chevron Corp 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 Procter Gamble with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Chevron Corp.
Diversification Opportunities for Procter Gamble and Chevron Corp
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Procter and Chevron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and Chevron Corp CEDEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp CEDEAR and Procter Gamble 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 Procter Gamble DRC are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp CEDEAR has no effect on the direction of Procter Gamble i.e., Procter Gamble and Chevron Corp go up and down completely randomly.
Pair Corralation between Procter Gamble and Chevron Corp
Assuming the 90 days horizon Procter Gamble DRC is expected to under-perform the Chevron Corp. But the stock apears to be less risky and, when comparing its historical volatility, Procter Gamble DRC is 1.05 times less risky than Chevron Corp. The stock trades about -0.09 of its potential returns per unit of risk. The Chevron Corp CEDEAR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,180,000 in Chevron Corp CEDEAR on November 2, 2024 and sell it today you would lose (22,500) from holding Chevron Corp CEDEAR or give up 1.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble DRC vs. Chevron Corp CEDEAR
Performance |
| Timeline |
| Procter Gamble DRC |
| Chevron Corp CEDEAR |
Procter Gamble and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Chevron Corp
The main advantage of trading using opposite Procter Gamble and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.| Procter Gamble vs. United States Steel | Procter Gamble vs. Harmony Gold Mining | Procter Gamble vs. Transportadora de Gas |
| Chevron Corp vs. Agrometal SAI | Chevron Corp vs. United States Steel | Chevron Corp vs. Capex SA | Chevron Corp vs. Pfizer Inc |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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