Correlation Between Procter Gamble and HP

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

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

Diversification Opportunities for Procter Gamble and HP

0.25

Correlation Coefficient

Procter Gamble  HP

Modest diversification

The 3 months correlation between Procter and HP is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Procter Gamble i.e., Procter Gamble and HP go up and down completely randomly.

Pair Corralation between Procter Gamble and HP

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.56 times more return on investment than HP. However, Procter Gamble is 1.79 times less risky than HP. It trades about -0.22 of its potential returns per unit of risk. HP Inc is currently generating about -0.23 per unit of risk. If you would invest  16,121  in Procter Gamble on January 16, 2024 and sell it today you would lose (576.00) from holding Procter Gamble or give up 3.57% of portfolio value over 90 days.

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

Procter Gamble  vs.  HP Inc

Procter Gamble

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 7 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Procter Gamble and HP

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

The idea behind Procter Gamble and HP Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.