Correlation Between Wolverine World and Procter Gamble

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

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

Diversification Opportunities for Wolverine World and Procter Gamble

0.69

Correlation Coefficient

Wolverine World  Procter Gamble

Poor diversification

The 3 months correlation between Wolverine and Procter is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Wolverine World Wide and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Wolverine World 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 Wolverine World Wide 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 Wolverine World i.e., Wolverine World and Procter Gamble go up and down completely randomly.

Pair Corralation between Wolverine World and Procter Gamble

Considering the 90-day investment horizon Wolverine World Wide is expected to generate 5.2 times more return on investment than Procter Gamble. However, Wolverine World is 5.2 times more volatile than Procter Gamble. It trades about 0.2 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.16 per unit of risk. If you would invest  902.00  in Wolverine World Wide on February 12, 2024 and sell it today you would earn a total of  447.00  from holding Wolverine World Wide or generate 49.56% return on investment over 90 days.

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

Wolverine World Wide  vs.  Procter Gamble

Wolverine World Wide

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolverine World Wide are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Wolverine World showed solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 12 (%) 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 June 2024.

Pair Trading with Wolverine World and Procter Gamble

The main advantage of trading using opposite Wolverine World and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wolverine World 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 Wolverine World Wide 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.