Correlation Between Procter Gamble and ELF Beauty
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and ELF Beauty 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 ELF Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and ELF Beauty, you can compare the effects of market volatilities on Procter Gamble and ELF Beauty 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 ELF Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and ELF Beauty.
Diversification Opportunities for Procter Gamble and ELF Beauty
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Procter and ELF is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and ELF Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELF Beauty 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 ELF Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELF Beauty has no effect on the direction of Procter Gamble i.e., Procter Gamble and ELF Beauty go up and down completely randomly.
Pair Corralation between Procter Gamble and ELF Beauty
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.4 times more return on investment than ELF Beauty. However, Procter Gamble is 2.49 times less risky than ELF Beauty. It trades about 0.06 of its potential returns per unit of risk. ELF Beauty is currently generating about -0.19 per unit of risk. If you would invest 16,497 in Procter Gamble on November 2, 2024 and sell it today you would earn a total of 244.00 from holding Procter Gamble or generate 1.48% 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 vs. ELF Beauty
Performance |
| Timeline |
| Procter Gamble |
| ELF Beauty |
Procter Gamble and ELF Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and ELF Beauty
The main advantage of trading using opposite Procter Gamble and ELF Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, ELF Beauty 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 ELF Beauty will offset losses from the drop in ELF Beauty's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies |
| ELF Beauty vs. Procter Gamble | ELF Beauty vs. Colgate Palmolive | ELF Beauty vs. Coty Inc | ELF Beauty vs. Kenvue Inc |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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