Correlation Between United Parcel and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both United Parcel 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 United Parcel and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and The Procter Gamble, you can compare the effects of market volatilities on United Parcel 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 United Parcel with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Procter Gamble.
Diversification Opportunities for United Parcel and Procter Gamble
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Procter is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Procter Gamble go up and down completely randomly.
Pair Corralation between United Parcel and Procter Gamble
Assuming the 90 days trading horizon United Parcel is expected to generate 1.48 times less return on investment than Procter Gamble. In addition to that, United Parcel is 1.27 times more volatile than The Procter Gamble. It trades about 0.06 of its total potential returns per unit of risk. The Procter Gamble is currently generating about 0.12 per unit of volatility. If you would invest 6,102 in The Procter Gamble on September 3, 2024 and sell it today you would earn a total of 1,481 from holding The Procter Gamble or generate 24.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Parcel Service vs. The Procter Gamble
Performance |
| Timeline |
| United Parcel Service |
| Procter Gamble |
United Parcel and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parcel and Procter Gamble
The main advantage of trading using opposite United Parcel and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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.| United Parcel vs. FedEx | United Parcel vs. Sequoia Logstica e | United Parcel vs. Energisa SA | United Parcel vs. BTG Pactual Logstica |
| Procter Gamble vs. Metalrgica Riosulense SA | Procter Gamble vs. GP Investments | Procter Gamble vs. Verizon Communications | Procter Gamble vs. Micron Technology |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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