Correlation Between Volkswagen and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and The Procter Gamble, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Procter Gamble.
Diversification Opportunities for Volkswagen and Procter Gamble
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volkswagen and Procter is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and Procter Gamble go up and down completely randomly.
Pair Corralation between Volkswagen and Procter Gamble
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Procter Gamble. In addition to that, Volkswagen is 1.69 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 0.05 per unit of volatility. If you would invest 13,505 in The Procter Gamble on August 27, 2024 and sell it today you would earn a total of 3,521 from holding The Procter Gamble or generate 26.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. The Procter Gamble
Performance |
| Timeline |
| Volkswagen AG |
| Procter Gamble |
Volkswagen and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Procter Gamble
The main advantage of trading using opposite Volkswagen and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG and The 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. 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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