Correlation Between Procter Gamble and Clorox
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Clorox 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 Procter Gamble and Clorox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and The Clorox, you can compare the effects of market volatilities on Procter Gamble and Clorox 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 Procter Gamble with a short position of Clorox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Clorox.
Diversification Opportunities for Procter Gamble and Clorox
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Clorox is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox and Procter Gamble 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 Procter Gamble are associated (or correlated) with Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of Procter Gamble i.e., Procter Gamble and Clorox go up and down completely randomly.
Pair Corralation between Procter Gamble and Clorox
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.55 times more return on investment than Clorox. However, Procter Gamble is 1.83 times less risky than Clorox. It trades about 0.0 of its potential returns per unit of risk. The Clorox is currently generating about -0.11 per unit of risk. If you would invest 15,749 in Procter Gamble on January 20, 2024 and sell it today you would lose (20.00) from holding Procter Gamble or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Procter Gamble vs. The Clorox
Performance |
| Timeline |
| Procter Gamble |
| Clorox |
Procter Gamble and Clorox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Clorox
The main advantage of trading using opposite Procter Gamble and Clorox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Clorox 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 Clorox will offset losses from the drop in Clorox's long position.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| Clorox vs. Unilever PLC ADR | Clorox vs. Estee Lauder Companies | Clorox vs. ELF Beauty | Clorox vs. Coty Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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