Correlation Between Pool and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Pool and Procter Gamble 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 Pool and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and Procter Gamble, you can compare the effects of market volatilities on Pool and Procter Gamble 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 Pool with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and Procter Gamble.
Diversification Opportunities for Pool and Procter Gamble
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pool and Procter is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Pool 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 Pool Corporation are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Pool i.e., Pool and Procter Gamble go up and down completely randomly.
Pair Corralation between Pool and Procter Gamble
Given the investment horizon of 90 days Pool Corporation is expected to generate 2.12 times more return on investment than Procter Gamble. However, Pool is 2.12 times more volatile than Procter Gamble. It trades about 0.02 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.05 per unit of risk. If you would invest 32,716 in Pool Corporation on September 3, 2024 and sell it today you would earn a total of 4,993 from holding Pool Corporation or generate 15.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. Procter Gamble
Performance |
| Timeline |
| Pool |
| Procter Gamble |
Pool and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and Procter Gamble
The main advantage of trading using opposite Pool and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.The idea behind Pool Corporation and Procter Gamble 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.| Procter Gamble vs. Highway Holdings Limited | Procter Gamble vs. QCR Holdings | Procter Gamble vs. Partner Communications | Procter Gamble vs. Acumen Pharmaceuticals |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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