Correlation Between Procter Gamble and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and MCF Energy 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 MCF Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and MCF Energy, you can compare the effects of market volatilities on Procter Gamble and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and MCF Energy.
Diversification Opportunities for Procter Gamble and MCF Energy
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and MCF is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Procter Gamble i.e., Procter Gamble and MCF Energy go up and down completely randomly.
Pair Corralation between Procter Gamble and MCF Energy
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.1 times more return on investment than MCF Energy. However, Procter Gamble is 9.65 times less risky than MCF Energy. It trades about 0.37 of its potential returns per unit of risk. MCF Energy is currently generating about -0.25 per unit of risk. If you would invest 16,508 in Procter Gamble on September 4, 2024 and sell it today you would earn a total of 1,462 from holding Procter Gamble or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Procter Gamble vs. MCF Energy
Performance |
| Timeline |
| Procter Gamble |
| MCF Energy |
Procter Gamble and MCF Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and MCF Energy
The main advantage of trading using opposite Procter Gamble and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies |
| MCF Energy vs. Compania Cervecerias Unidas | MCF Energy vs. Diageo PLC ADR | MCF Energy vs. Insteel Industries | MCF Energy vs. BRC Inc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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