Correlation Between Procter Gamble and Envirotech Vehicles

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

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

Diversification Opportunities for Procter Gamble and Envirotech Vehicles

0.7

Correlation Coefficient

Procter Gamble  Envirotech Vehicles

Poor diversification

The 3 months correlation between Procter and Envirotech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Envirotech Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envirotech Vehicles 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 Envirotech Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envirotech Vehicles has no effect on the direction of Procter Gamble i.e., Procter Gamble and Envirotech Vehicles go up and down completely randomly.

Pair Corralation between Procter Gamble and Envirotech Vehicles

Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Envirotech Vehicles. But the stock apears to be less risky and, when comparing its historical volatility, Procter Gamble is 7.43 times less risky than Envirotech Vehicles. The stock trades about -0.18 of its potential returns per unit of risk. The Envirotech Vehicles is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Envirotech Vehicles on January 19, 2024 and sell it today you would earn a total of  2.00  from holding Envirotech Vehicles or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Procter Gamble  vs.  Envirotech Vehicles

Procter Gamble

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Envirotech Vehicles

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Envirotech Vehicles are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Envirotech Vehicles showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and Envirotech Vehicles

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

The idea behind Procter Gamble and Envirotech Vehicles 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.