Correlation Between Procter Gamble and Federal National
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Federal National 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 Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Federal National Mortgage, you can compare the effects of market volatilities on Procter Gamble and Federal National 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 Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Federal National.
Diversification Opportunities for Procter Gamble and Federal National
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Procter and Federal is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Procter Gamble i.e., Procter Gamble and Federal National go up and down completely randomly.
Pair Corralation between Procter Gamble and Federal National
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 11.57 times less return on investment than Federal National. But when comparing it to its historical volatility, Procter Gamble is 9.42 times less risky than Federal National. It trades about 0.37 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 133.00 in Federal National Mortgage on September 3, 2024 and sell it today you would earn a total of 180.00 from holding Federal National Mortgage or generate 135.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Federal National Mortgage
Performance |
| Timeline |
| Procter Gamble |
| Federal National Mortgage |
Procter Gamble and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Federal National
The main advantage of trading using opposite Procter Gamble and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National's long position.| Procter Gamble vs. Highway Holdings Limited | Procter Gamble vs. QCR Holdings | Procter Gamble vs. Partner Communications | Procter Gamble vs. Acumen Pharmaceuticals |
| Federal National vs. Acco Brands | Federal National vs. Stepstone Group | Federal National vs. Papaya Growth Opportunity | Federal National vs. Ihuman 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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