Correlation Between Procter Gamble and IHI Corp
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and IHI Corp 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 IHI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and IHI Corp ADR, you can compare the effects of market volatilities on Procter Gamble and IHI Corp 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 IHI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and IHI Corp.
Diversification Opportunities for Procter Gamble and IHI Corp
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and IHI is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and IHI Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHI Corp ADR 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 IHI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHI Corp ADR has no effect on the direction of Procter Gamble i.e., Procter Gamble and IHI Corp go up and down completely randomly.
Pair Corralation between Procter Gamble and IHI Corp
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.2 times more return on investment than IHI Corp. However, Procter Gamble is 4.9 times less risky than IHI Corp. It trades about 0.29 of its potential returns per unit of risk. IHI Corp ADR is currently generating about -0.02 per unit of risk. If you would invest 16,717 in Procter Gamble on August 30, 2024 and sell it today you would earn a total of 1,219 from holding Procter Gamble or generate 7.29% 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. IHI Corp ADR
Performance |
| Timeline |
| Procter Gamble |
| IHI Corp ADR |
Procter Gamble and IHI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and IHI Corp
The main advantage of trading using opposite Procter Gamble and IHI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, IHI Corp 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 IHI Corp will offset losses from the drop in IHI Corp's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Church Dwight | Procter Gamble vs. Kimberly Clark |
| IHI Corp vs. Sandvik AB ADR | IHI Corp vs. Schneider Electric SA | IHI Corp vs. Fanuc | IHI Corp vs. Rockwell Automation |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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