Correlation Between Procter Gamble and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Eversource Energy 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 Eversource Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Eversource Energy, you can compare the effects of market volatilities on Procter Gamble and Eversource Energy 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 Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Eversource Energy.
Diversification Opportunities for Procter Gamble and Eversource Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Eversource is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy 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 Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of Procter Gamble i.e., Procter Gamble and Eversource Energy go up and down completely randomly.
Pair Corralation between Procter Gamble and Eversource Energy
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.84 times more return on investment than Eversource Energy. However, Procter Gamble is 1.2 times less risky than Eversource Energy. It trades about 0.17 of its potential returns per unit of risk. Eversource Energy is currently generating about -0.12 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Eversource Energy
Performance |
| Timeline |
| Procter Gamble |
| Eversource Energy |
Procter Gamble and Eversource Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Eversource Energy
The main advantage of trading using opposite Procter Gamble and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Eversource Energy 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 Eversource Energy will offset losses from the drop in Eversource Energy'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 |
| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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