Correlation Between Procter Gamble and Shopify
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Shopify 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 Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Shopify, you can compare the effects of market volatilities on Procter Gamble and Shopify 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 Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Shopify.
Diversification Opportunities for Procter Gamble and Shopify
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Procter and Shopify is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Procter Gamble i.e., Procter Gamble and Shopify go up and down completely randomly.
Pair Corralation between Procter Gamble and Shopify
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 11.62 times less return on investment than Shopify. But when comparing it to its historical volatility, Procter Gamble is 1.87 times less risky than Shopify. It trades about 0.06 of its potential returns per unit of risk. Shopify is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 10,335 in Shopify on November 18, 2024 and sell it today you would earn a total of 2,500 from holding Shopify or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Shopify
Performance |
| Timeline |
| Procter Gamble |
| Shopify |
Procter Gamble and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Shopify
The main advantage of trading using opposite Procter Gamble and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Church Dwight |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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