Correlation Between Procter Gamble and Kimberly Clark
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Kimberly Clark 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 Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Kimberly Clark, you can compare the effects of market volatilities on Procter Gamble and Kimberly Clark 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 Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Kimberly Clark.
Diversification Opportunities for Procter Gamble and Kimberly Clark
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Kimberly is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of Procter Gamble i.e., Procter Gamble and Kimberly Clark go up and down completely randomly.
Pair Corralation between Procter Gamble and Kimberly Clark
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.12 times less return on investment than Kimberly Clark. But when comparing it to its historical volatility, Procter Gamble is 1.13 times less risky than Kimberly Clark. It trades about 0.06 of its potential returns per unit of risk. Kimberly Clark is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 12,695 in Kimberly Clark on August 24, 2024 and sell it today you would earn a total of 1,008 from holding Kimberly Clark or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Kimberly Clark
Performance |
| Timeline |
| Procter Gamble |
| Kimberly Clark |
Procter Gamble and Kimberly Clark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Kimberly Clark
The main advantage of trading using opposite Procter Gamble and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.| Procter Gamble vs. Honest Company | Procter Gamble vs. Hims Hers Health | Procter Gamble vs. Kimberly Clark | Procter Gamble vs. Colgate Palmolive |
| Kimberly Clark vs. Colgate Palmolive | Kimberly Clark vs. Estee Lauder Companies | Kimberly Clark vs. Procter Gamble | Kimberly Clark vs. United Guardian |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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