Correlation Between Rolls Royce and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Rolls Royce 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 Rolls Royce and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings plc and The Procter Gamble, you can compare the effects of market volatilities on Rolls Royce 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 Rolls Royce with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Procter Gamble.
Diversification Opportunities for Rolls Royce and Procter Gamble
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rolls and Procter is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Rolls Royce 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 Rolls Royce Holdings plc 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 Rolls Royce i.e., Rolls Royce and Procter Gamble go up and down completely randomly.
Pair Corralation between Rolls Royce and Procter Gamble
Assuming the 90 days horizon Rolls Royce Holdings plc is expected to generate 2.68 times more return on investment than Procter Gamble. However, Rolls Royce is 2.68 times more volatile than The Procter Gamble. It trades about 0.15 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.05 per unit of risk. If you would invest 108.00 in Rolls Royce Holdings plc on August 27, 2024 and sell it today you would earn a total of 551.00 from holding Rolls Royce Holdings plc or generate 510.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. The Procter Gamble
Performance |
| Timeline |
| Rolls Royce Holdings |
| Procter Gamble |
Rolls Royce and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Procter Gamble
The main advantage of trading using opposite Rolls Royce and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce 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.| Rolls Royce vs. Raytheon Technologies Corp | Rolls Royce vs. The Boeing | Rolls Royce vs. The Boeing | Rolls Royce vs. Airbus SE |
| Procter Gamble vs. Superior Plus Corp | Procter Gamble vs. Origin Agritech | Procter Gamble vs. Identiv | Procter Gamble vs. INTUITIVE SURGICAL |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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