Correlation Between Kimberly Clark and Procter Gamble

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

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

Diversification Opportunities for Kimberly Clark and Procter Gamble

0.29

Correlation Coefficient

Kimberly Clark  Procter Gamble

Modest diversification

The 3 months correlation between Kimberly and Procter is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Kimberly Clark 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 Kimberly Clark 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 Kimberly Clark i.e., Kimberly Clark and Procter Gamble go up and down completely randomly.

Pair Corralation between Kimberly Clark and Procter Gamble

Considering the 90-day investment horizon Kimberly Clark is expected to generate 1.05 times more return on investment than Procter Gamble. However, Kimberly Clark is 1.05 times more volatile than Procter Gamble. It trades about 0.06 of its potential returns per unit of risk. Procter Gamble is currently generating about -0.13 per unit of risk. If you would invest  12,442  in Kimberly Clark on January 20, 2024 and sell it today you would earn a total of  119.00  from holding Kimberly Clark or generate 0.96% return on investment over 90 days.

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

Kimberly Clark  vs.  Procter Gamble

Kimberly Clark

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Kimberly Clark is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Procter Gamble

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Kimberly Clark and Procter Gamble

The main advantage of trading using opposite Kimberly Clark and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimberly Clark 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 Kimberly Clark 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.