Correlation Between Procter Gamble and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Emerson Radio 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 Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Emerson Radio, you can compare the effects of market volatilities on Procter Gamble and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Emerson Radio.
Diversification Opportunities for Procter Gamble and Emerson Radio
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Procter and Emerson is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Procter Gamble i.e., Procter Gamble and Emerson Radio go up and down completely randomly.
Pair Corralation between Procter Gamble and Emerson Radio
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.29 times more return on investment than Emerson Radio. However, Procter Gamble is 3.42 times less risky than Emerson Radio. It trades about 0.06 of its potential returns per unit of risk. Emerson Radio is currently generating about 0.0 per unit of risk. If you would invest 13,225 in Procter Gamble on November 6, 2024 and sell it today you would earn a total of 3,651 from holding Procter Gamble or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Emerson Radio
Performance |
| Timeline |
| Procter Gamble |
| Emerson Radio |
Procter Gamble and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Emerson Radio
The main advantage of trading using opposite Procter Gamble and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Church Dwight |
| Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Koss Corporation | Emerson Radio vs. Wearable Devices |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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