Correlation Between Procter Gamble and Capital World
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Capital World 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 Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Capital World Growth, you can compare the effects of market volatilities on Procter Gamble and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Capital World.
Diversification Opportunities for Procter Gamble and Capital World
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Procter and Capital is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Procter Gamble i.e., Procter Gamble and Capital World go up and down completely randomly.
Pair Corralation between Procter Gamble and Capital World
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.49 times more return on investment than Capital World. However, Procter Gamble is 1.49 times more volatile than Capital World Growth. It trades about 0.05 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.34 per unit of risk. If you would invest 15,916 in Procter Gamble on January 23, 2024 and sell it today you would earn a total of 138.00 from holding Procter Gamble or generate 0.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Procter Gamble vs. Capital World Growth
Performance |
Timeline |
Procter Gamble |
Capital World Growth |
Procter Gamble and Capital World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Procter Gamble and Capital World
The main advantage of trading using opposite Procter Gamble and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World'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 |
Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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