Correlation Between Procter Gamble and SWFTC
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and SWFTC 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 SWFTC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and SWFTC, you can compare the effects of market volatilities on Procter Gamble and SWFTC 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 SWFTC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and SWFTC.
Diversification Opportunities for Procter Gamble and SWFTC
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and SWFTC is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and SWFTC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWFTC 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 SWFTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWFTC has no effect on the direction of Procter Gamble i.e., Procter Gamble and SWFTC go up and down completely randomly.
Pair Corralation between Procter Gamble and SWFTC
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 5.11 times less return on investment than SWFTC. But when comparing it to its historical volatility, Procter Gamble is 6.67 times less risky than SWFTC. It trades about 0.17 of its potential returns per unit of risk. SWFTC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.31 in SWFTC on August 27, 2024 and sell it today you would earn a total of 0.05 from holding SWFTC or generate 16.43% 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. SWFTC
Performance |
| Timeline |
| Procter Gamble |
| SWFTC |
Procter Gamble and SWFTC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and SWFTC
The main advantage of trading using opposite Procter Gamble and SWFTC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, SWFTC 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 SWFTC will offset losses from the drop in SWFTC's long position.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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