Correlation Between Procter Gamble and LOWES

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

Diversification Opportunities for Procter Gamble and LOWES

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Procter and LOWES is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and LOWES PANIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOWES PANIES INC 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 LOWES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOWES PANIES INC has no effect on the direction of Procter Gamble i.e., Procter Gamble and LOWES go up and down completely randomly.

Pair Corralation between Procter Gamble and LOWES

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 3.11 times more return on investment than LOWES. However, Procter Gamble is 3.11 times more volatile than LOWES PANIES INC. It trades about 0.14 of its potential returns per unit of risk. LOWES PANIES INC is currently generating about -0.22 per unit of risk. If you would invest  16,584  in Procter Gamble on September 13, 2024 and sell it today you would earn a total of  507.00  from holding Procter Gamble or generate 3.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Procter Gamble  vs.  LOWES PANIES INC

 Performance 
       Timeline  
Procter Gamble 

Risk-Adjusted Performance

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Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
LOWES PANIES INC 

Risk-Adjusted Performance

0 of 100

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

Procter Gamble and LOWES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and LOWES

The main advantage of trading using opposite Procter Gamble and LOWES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, LOWES 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 LOWES will offset losses from the drop in LOWES's long position.
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The idea behind Procter Gamble and LOWES PANIES INC 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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