Correlation Between Ralph Lauren and Procter Gamble

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Can any of the company-specific risk be diversified away by investing in both Ralph Lauren 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 Ralph Lauren and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ralph Lauren Corp and Procter Gamble, you can compare the effects of market volatilities on Ralph Lauren 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 Ralph Lauren with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and Procter Gamble.

Diversification Opportunities for Ralph Lauren and Procter Gamble

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ralph and Procter is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Ralph Lauren 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 Ralph Lauren Corp 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 Ralph Lauren i.e., Ralph Lauren and Procter Gamble go up and down completely randomly.

Pair Corralation between Ralph Lauren and Procter Gamble

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 2.02 times more return on investment than Procter Gamble. However, Ralph Lauren is 2.02 times more volatile than Procter Gamble. It trades about 0.07 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.02 per unit of risk. If you would invest  9,967  in Ralph Lauren Corp on December 30, 2023 and sell it today you would earn a total of  8,809  from holding Ralph Lauren Corp or generate 88.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ralph Lauren Corp  vs.  Procter Gamble

 Performance 
       Timeline  
Ralph Lauren Corp 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.
Procter Gamble 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Ralph Lauren and Procter Gamble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ralph Lauren and Procter Gamble

The main advantage of trading using opposite Ralph Lauren and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren 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 Ralph Lauren Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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