Correlation Between Procter Gamble and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Prudential Financial 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 Prudential Financial 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 Prudential Financial, you can compare the effects of market volatilities on Procter Gamble and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Prudential Financial.
Diversification Opportunities for Procter Gamble and Prudential Financial
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Prudential is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Procter Gamble i.e., Procter Gamble and Prudential Financial go up and down completely randomly.
Pair Corralation between Procter Gamble and Prudential Financial
Assuming the 90 days horizon Procter Gamble DRC is expected to generate 5.13 times more return on investment than Prudential Financial. However, Procter Gamble is 5.13 times more volatile than Prudential Financial. It trades about 0.33 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.22 per unit of risk. If you would invest 333,012 in Procter Gamble DRC on August 31, 2024 and sell it today you would earn a total of 35,319 from holding Procter Gamble DRC or generate 10.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble DRC vs. Prudential Financial
Performance |
| Timeline |
| Procter Gamble DRC |
| Prudential Financial |
Procter Gamble and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Prudential Financial
The main advantage of trading using opposite Procter Gamble and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Procter Gamble vs. Prudential Financial | Procter Gamble vs. Southern Copper | Procter Gamble vs. FIBRA Storage | Procter Gamble vs. Ameriprise Financial |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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