Correlation Between Procter Gamble and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Northern Lights, you can compare the effects of market volatilities on Procter Gamble and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Northern Lights.
Diversification Opportunities for Procter Gamble and Northern Lights
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Procter and Northern is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Procter Gamble i.e., Procter Gamble and Northern Lights go up and down completely randomly.
Pair Corralation between Procter Gamble and Northern Lights
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.43 times more return on investment than Northern Lights. However, Procter Gamble is 2.43 times more volatile than Northern Lights. It trades about 0.05 of its potential returns per unit of risk. Northern Lights is currently generating about 0.05 per unit of risk. If you would invest 14,361 in Procter Gamble on August 30, 2024 and sell it today you would earn a total of 3,575 from holding Procter Gamble or generate 24.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Northern Lights
Performance |
| Timeline |
| Procter Gamble |
| Northern Lights |
Procter Gamble and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Northern Lights
The main advantage of trading using opposite Procter Gamble and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Church Dwight | Procter Gamble vs. Kimberly Clark |
| Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire Global Hope | Northern Lights vs. Northern Lights | Northern Lights vs. Inspire International ESG |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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