Correlation Between Procter Gamble and Walmart
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Walmart 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 Walmart 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 Walmart, you can compare the effects of market volatilities on Procter Gamble and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Walmart.
Diversification Opportunities for Procter Gamble and Walmart
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Procter and Walmart is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Procter Gamble i.e., Procter Gamble and Walmart go up and down completely randomly.
Pair Corralation between Procter Gamble and Walmart
Assuming the 90 days horizon Procter Gamble DRC is expected to under-perform the Walmart. In addition to that, Procter Gamble is 1.02 times more volatile than Walmart. It trades about -0.09 of its total potential returns per unit of risk. Walmart is currently generating about 0.11 per unit of volatility. If you would invest 560,000 in Walmart on November 2, 2024 and sell it today you would earn a total of 85,000 from holding Walmart or generate 15.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Procter Gamble DRC vs. Walmart
Performance |
Timeline |
Procter Gamble DRC |
Walmart |
Procter Gamble and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Procter Gamble and Walmart
The main advantage of trading using opposite Procter Gamble and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.Procter Gamble vs. United States Steel | Procter Gamble vs. Harmony Gold Mining | Procter Gamble vs. Transportadora de Gas |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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