Correlation Between Procter Gamble and Archer Daniels
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Archer Daniels 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 Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Archer Daniels Midland, you can compare the effects of market volatilities on Procter Gamble and Archer Daniels 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 Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Archer Daniels.
Diversification Opportunities for Procter Gamble and Archer Daniels
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Procter and Archer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 are associated (or correlated) with Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Procter Gamble i.e., Procter Gamble and Archer Daniels go up and down completely randomly.
Pair Corralation between Procter Gamble and Archer Daniels
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.68 times more return on investment than Archer Daniels. However, Procter Gamble is 1.47 times less risky than Archer Daniels. It trades about 0.17 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.18 per unit of risk. If you would invest 16,930 in Procter Gamble on August 27, 2024 and sell it today you would earn a total of 698.00 from holding Procter Gamble or generate 4.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Archer Daniels Midland
Performance |
| Timeline |
| Procter Gamble |
| Archer Daniels Midland |
Procter Gamble and Archer Daniels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Archer Daniels
The main advantage of trading using opposite Procter Gamble and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| Archer Daniels vs. Adecoagro SA | Archer Daniels vs. Cal Maine Foods | Archer Daniels vs. Tyson Foods | Archer Daniels vs. Fresh Del Monte |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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