Correlation Between Anheuser Busch and Procter Gamble

Can any of the company-specific risk be diversified away by investing in both Anheuser Busch 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 Anheuser Busch and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anheuser Busch Inbev and Procter Gamble, you can compare the effects of market volatilities on Anheuser Busch 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 Anheuser Busch with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and Procter Gamble.

Diversification Opportunities for Anheuser Busch and Procter Gamble

0.2

Correlation Coefficient

Anheuser Busch  Procter Gamble

Modest diversification

The 3 months correlation between Anheuser and Procter is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Anheuser Busch 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 Anheuser Busch Inbev 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 Anheuser Busch i.e., Anheuser Busch and Procter Gamble go up and down completely randomly.

Pair Corralation between Anheuser Busch and Procter Gamble

Considering the 90-day investment horizon Anheuser Busch is expected to generate 5.93 times less return on investment than Procter Gamble. In addition to that, Anheuser Busch is 2.08 times more volatile than Procter Gamble. It trades about 0.01 of its total potential returns per unit of risk. Procter Gamble is currently generating about 0.17 per unit of volatility. If you would invest  15,610  in Procter Gamble on February 11, 2024 and sell it today you would earn a total of  1,075  from holding Procter Gamble or generate 6.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Anheuser Busch Inbev  vs.  Procter Gamble

Anheuser Busch Inbev

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Anheuser Busch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Procter Gamble

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Anheuser Busch and Procter Gamble

The main advantage of trading using opposite Anheuser Busch and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch Inbev and 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.

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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 Stocks Directory module to find actively traded stocks across global markets.