Correlation Between 594918AR5 and Procter Gamble

Can any of the company-specific risk be diversified away by investing in both 594918AR5 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 594918AR5 and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MICROSOFT P 35 and Procter Gamble, you can compare the effects of market volatilities on 594918AR5 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 594918AR5 with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of 594918AR5 and Procter Gamble.

Diversification Opportunities for 594918AR5 and Procter Gamble

-0.11

Correlation Coefficient

594918AR5  Procter Gamble

Good diversification

The 3 months correlation between 594918AR5 and Procter is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MICROSOFT P 35 and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and 594918AR5 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 MICROSOFT P 35 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 594918AR5 i.e., 594918AR5 and Procter Gamble go up and down completely randomly.

Pair Corralation between 594918AR5 and Procter Gamble

Assuming the 90 days trading horizon MICROSOFT P 35 is expected to generate 4.83 times more return on investment than Procter Gamble. However, 594918AR5 is 4.83 times more volatile than Procter Gamble. It trades about 0.1 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.07 per unit of risk. If you would invest  7,552  in MICROSOFT P 35 on January 20, 2024 and sell it today you would earn a total of  4,220  from holding MICROSOFT P 35 or generate 55.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.97%
Values	Daily Returns

MICROSOFT P 35  vs.  Procter Gamble

MICROSOFT P 35

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MICROSOFT P 35 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, 594918AR5 sustained solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with 594918AR5 and Procter Gamble

The main advantage of trading using opposite 594918AR5 and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 594918AR5 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 MICROSOFT P 35 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.