Correlation Between Procter Gamble and Bank of America
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Bank of America, you can compare the effects of market volatilities on Procter Gamble and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Bank of America.
Diversification Opportunities for Procter Gamble and Bank of America
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and Bank is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Procter Gamble i.e., Procter Gamble and Bank of America go up and down completely randomly.
Pair Corralation between Procter Gamble and Bank of America
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.15 times more return on investment than Bank of America. However, Procter Gamble is 2.15 times more volatile than Bank of America. It trades about 0.17 of its potential returns per unit of risk. Bank of America is currently generating about 0.02 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Bank of America
Performance |
| Timeline |
| Procter Gamble |
| Bank of America |
Procter Gamble and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Bank of America
The main advantage of trading using opposite Procter Gamble and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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