Correlation Between Procter Gamble and Henkel AG
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Henkel AG 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 Henkel AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Henkel AG Co, you can compare the effects of market volatilities on Procter Gamble and Henkel AG 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 Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Henkel AG.
Diversification Opportunities for Procter Gamble and Henkel AG
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Procter and Henkel is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG 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 Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Procter Gamble i.e., Procter Gamble and Henkel AG go up and down completely randomly.
Pair Corralation between Procter Gamble and Henkel AG
Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Henkel AG. But the stock apears to be less risky and, when comparing its historical volatility, Procter Gamble is 1.44 times less risky than Henkel AG. The stock trades about -0.27 of its potential returns per unit of risk. The Henkel AG Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,843 in Henkel AG Co on September 23, 2024 and sell it today you would earn a total of 82.00 from holding Henkel AG Co or generate 4.45% 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. Henkel AG Co
Performance |
| Timeline |
| Procter Gamble |
| Henkel AG |
Procter Gamble and Henkel AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Henkel AG
The main advantage of trading using opposite Procter Gamble and Henkel AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Henkel AG 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 Henkel AG will offset losses from the drop in Henkel AG's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Church Dwight |
| Henkel AG vs. LOreal Co ADR | Henkel AG vs. Estee Lauder Companies | Henkel AG vs. Church Dwight | Henkel AG vs. LOral 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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