Correlation Between Procter Gamble and Air Products
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Air Products 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 Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Air Products and, you can compare the effects of market volatilities on Procter Gamble and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Air Products.
Diversification Opportunities for Procter Gamble and Air Products
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and Air is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Procter Gamble i.e., Procter Gamble and Air Products go up and down completely randomly.
Pair Corralation between Procter Gamble and Air Products
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 3.26 times less return on investment than Air Products. But when comparing it to its historical volatility, Procter Gamble is 1.65 times less risky than Air Products. It trades about 0.06 of its potential returns per unit of risk. Air Products and is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 26,125 in Air Products and on August 24, 2024 and sell it today you would earn a total of 6,760 from holding Air Products and or generate 25.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Air Products and
Performance |
| Timeline |
| Procter Gamble |
| Air Products |
Procter Gamble and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Air Products
The main advantage of trading using opposite Procter Gamble and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Procter Gamble vs. Honest Company | Procter Gamble vs. Hims Hers Health | Procter Gamble vs. Kimberly Clark | Procter Gamble vs. Colgate Palmolive |
| Air Products vs. PPG Industries | Air Products vs. Sherwin Williams Co | Air Products vs. Ecolab Inc | Air Products vs. Albemarle Corp |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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