Correlation Between Procter Gamble and 260543CL5

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Can any of the company-specific risk be diversified away by investing in both Procter Gamble and 260543CL5 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 260543CL5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and DOW CHEM 4625, you can compare the effects of market volatilities on Procter Gamble and 260543CL5 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 260543CL5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and 260543CL5.

Diversification Opportunities for Procter Gamble and 260543CL5

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Procter and 260543CL5 is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and DOW CHEM 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW CHEM 4625 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 260543CL5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW CHEM 4625 has no effect on the direction of Procter Gamble i.e., Procter Gamble and 260543CL5 go up and down completely randomly.

Pair Corralation between Procter Gamble and 260543CL5

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.09 times more return on investment than 260543CL5. However, Procter Gamble is 1.09 times more volatile than DOW CHEM 4625. It trades about 0.08 of its potential returns per unit of risk. DOW CHEM 4625 is currently generating about -0.01 per unit of risk. If you would invest  16,271  in Procter Gamble on August 30, 2024 and sell it today you would earn a total of  1,665  from holding Procter Gamble or generate 10.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy54.76%
ValuesDaily Returns

Procter Gamble  vs.  DOW CHEM 4625

 Performance 
       Timeline  
Procter Gamble 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
DOW CHEM 4625 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DOW CHEM 4625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 260543CL5 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Procter Gamble and 260543CL5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and 260543CL5

The main advantage of trading using opposite Procter Gamble and 260543CL5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, 260543CL5 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 260543CL5 will offset losses from the drop in 260543CL5's long position.
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The idea behind Procter Gamble and DOW CHEM 4625 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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