Correlation Between Procter Gamble and Krispy Kreme

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

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

Diversification Opportunities for Procter Gamble and Krispy Kreme

0.64

Correlation Coefficient

Procter Gamble  Krispy Kreme

Poor diversification

The 3 months correlation between Procter and Krispy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Krispy Kreme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krispy Kreme 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 Krispy Kreme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krispy Kreme has no effect on the direction of Procter Gamble i.e., Procter Gamble and Krispy Kreme go up and down completely randomly.

Pair Corralation between Procter Gamble and Krispy Kreme

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 4.73 times less return on investment than Krispy Kreme. But when comparing it to its historical volatility, Procter Gamble is 1.7 times less risky than Krispy Kreme. It trades about 0.11 of its potential returns per unit of risk. Krispy Kreme is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,073  in Krispy Kreme on June 23, 2024 and sell it today you would earn a total of  129.00  from holding Krispy Kreme or generate 12.02% 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.  Krispy Kreme

Procter Gamble

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Krispy Kreme

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Krispy Kreme are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Krispy Kreme may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Procter Gamble and Krispy Kreme

The main advantage of trading using opposite Procter Gamble and Krispy Kreme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Krispy Kreme 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 Krispy Kreme will offset losses from the drop in Krispy Kreme's long position.

The idea behind Procter Gamble and Krispy Kreme 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.