Correlation Between Procter Gamble and International Business
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and International Business Machines, you can compare the effects of market volatilities on Procter Gamble and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and International Business.
Diversification Opportunities for Procter Gamble and International Business
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Procter and International is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Procter Gamble i.e., Procter Gamble and International Business go up and down completely randomly.
Pair Corralation between Procter Gamble and International Business
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.78 times less return on investment than International Business. But when comparing it to its historical volatility, Procter Gamble is 1.35 times less risky than International Business. It trades about 0.06 of its potential returns per unit of risk. International Business Machines is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 12,291 in International Business Machines on August 24, 2024 and sell it today you would earn a total of 10,006 from holding International Business Machines or generate 81.41% 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. International Business Machine
Performance |
| Timeline |
| Procter Gamble |
| International Business |
Procter Gamble and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and International Business
The main advantage of trading using opposite Procter Gamble and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' 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 |
| International Business vs. CDW Corp | International Business vs. Eshallgo Class A | International Business vs. Amtech Systems | International Business vs. Gold Fields Ltd |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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