Correlation Between Procter Gamble and Gap,
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Gap, 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 Gap, into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and The Gap,, you can compare the effects of market volatilities on Procter Gamble and Gap, 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 Gap,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Gap,.
Diversification Opportunities for Procter Gamble and Gap,
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and Gap, is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Procter Gamble i.e., Procter Gamble and Gap, go up and down completely randomly.
Pair Corralation between Procter Gamble and Gap,
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 3.09 times less return on investment than Gap,. But when comparing it to its historical volatility, Procter Gamble is 3.69 times less risky than Gap,. It trades about 0.05 of its potential returns per unit of risk. The Gap, is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,389 in The Gap, on August 24, 2024 and sell it today you would earn a total of 815.00 from holding The Gap, or generate 58.68% 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. The Gap,
Performance |
| Timeline |
| Procter Gamble |
| Gap, |
Procter Gamble and Gap, Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Gap,
The main advantage of trading using opposite Procter Gamble and Gap, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Gap, 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 Gap, will offset losses from the drop in Gap,'s long position.| Procter Gamble vs. Eshallgo Class A | Procter Gamble vs. Amtech Systems | Procter Gamble vs. Gold Fields Ltd | Procter Gamble vs. Aegean Airlines SA |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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