Correlation Between Walmart and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Procter Gamble DRC, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Procter Gamble.
Diversification Opportunities for Walmart and Procter Gamble
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Walmart and Procter is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Procter Gamble DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble DRC and Walmart 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 Walmart 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 DRC has no effect on the direction of Walmart i.e., Walmart and Procter Gamble go up and down completely randomly.
Pair Corralation between Walmart and Procter Gamble
Assuming the 90 days trading horizon Walmart is expected to generate 0.99 times more return on investment than Procter Gamble. However, Walmart is 1.01 times less risky than Procter Gamble. It trades about 0.07 of its potential returns per unit of risk. Procter Gamble DRC is currently generating about -0.07 per unit of risk. If you would invest 599,000 in Walmart on October 20, 2024 and sell it today you would earn a total of 10,000 from holding Walmart or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Procter Gamble DRC
Performance |
| Timeline |
| Walmart |
| Procter Gamble DRC |
Walmart and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Procter Gamble
The main advantage of trading using opposite Walmart and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. United States Steel | Walmart vs. Telecom Argentina | Walmart vs. Transportadora de Gas | Walmart vs. Agrometal SAI |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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