Correlation Between Procter Gamble and Clorox

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

Diversification Opportunities for Procter Gamble and Clorox

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Procter and Clorox is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox 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 Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of Procter Gamble i.e., Procter Gamble and Clorox go up and down completely randomly.

Pair Corralation between Procter Gamble and Clorox

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.32 times more return on investment than Clorox. However, Procter Gamble is 3.12 times less risky than Clorox. It trades about 0.13 of its potential returns per unit of risk. The Clorox is currently generating about 0.0 per unit of risk. If you would invest  16,005  in Procter Gamble on December 30, 2023 and sell it today you would earn a total of  220.00  from holding Procter Gamble or generate 1.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Procter Gamble  vs.  The Clorox

 Performance 
       Timeline  
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.
Clorox 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Clorox are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Clorox may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Procter Gamble and Clorox Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and Clorox

The main advantage of trading using opposite Procter Gamble and Clorox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Clorox 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 Clorox will offset losses from the drop in Clorox's long position.
The idea behind Procter Gamble and The Clorox 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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