Correlation Between Procter Gamble and Flowers Foods
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Flowers Foods 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 Flowers Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Flowers Foods, you can compare the effects of market volatilities on Procter Gamble and Flowers Foods 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 Flowers Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Flowers Foods.
Diversification Opportunities for Procter Gamble and Flowers Foods
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Flowers is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers Foods 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 Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of Procter Gamble i.e., Procter Gamble and Flowers Foods go up and down completely randomly.
Pair Corralation between Procter Gamble and Flowers Foods
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.74 times more return on investment than Flowers Foods. However, Procter Gamble is 1.35 times less risky than Flowers Foods. It trades about 0.05 of its potential returns per unit of risk. Flowers Foods is currently generating about -0.02 per unit of risk. If you would invest 14,205 in Procter Gamble on August 27, 2024 and sell it today you would earn a total of 3,423 from holding Procter Gamble or generate 24.1% 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. Flowers Foods
Performance |
| Timeline |
| Procter Gamble |
| Flowers Foods |
Procter Gamble and Flowers Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Flowers Foods
The main advantage of trading using opposite Procter Gamble and Flowers Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Flowers Foods 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 Flowers Foods will offset losses from the drop in Flowers Foods' long position.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| Flowers Foods vs. ConAgra Foods | Flowers Foods vs. McCormick Company Incorporated | Flowers Foods vs. Campbell Soup | Flowers Foods vs. Kellanova |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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