Correlation Between Procter Gamble and NIKE
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and NIKE 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 NIKE 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 NIKE Inc, you can compare the effects of market volatilities on Procter Gamble and NIKE 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 NIKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and NIKE.
Diversification Opportunities for Procter Gamble and NIKE
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Procter and NIKE is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc 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 NIKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKE Inc has no effect on the direction of Procter Gamble i.e., Procter Gamble and NIKE go up and down completely randomly.
Pair Corralation between Procter Gamble and NIKE
Assuming the 90 days horizon Procter Gamble DRC is expected to generate 0.75 times more return on investment than NIKE. However, Procter Gamble DRC is 1.32 times less risky than NIKE. It trades about -0.05 of its potential returns per unit of risk. NIKE Inc is currently generating about -0.09 per unit of risk. If you would invest 1,352,500 in Procter Gamble DRC on September 19, 2024 and sell it today you would lose (45,000) from holding Procter Gamble DRC or give up 3.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Procter Gamble DRC vs. NIKE Inc
Performance |
Timeline |
Procter Gamble DRC |
NIKE Inc |
Procter Gamble and NIKE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Procter Gamble and NIKE
The main advantage of trading using opposite Procter Gamble and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, NIKE 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 NIKE will offset losses from the drop in NIKE's long position.Procter Gamble vs. Rigolleau SA | Procter Gamble vs. American Express Co | Procter Gamble vs. QUALCOMM Incorporated | Procter Gamble vs. United States Steel |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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