Correlation Between Procter Gamble and LOreal Co

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

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

Diversification Opportunities for Procter Gamble and LOreal Co

-0.15

Correlation Coefficient

Procter Gamble  LOreal Co

Good diversification

The 3 months correlation between Procter and LOreal is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and LOreal Co ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal Co ADR 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 LOreal Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal Co ADR has no effect on the direction of Procter Gamble i.e., Procter Gamble and LOreal Co go up and down completely randomly.

Pair Corralation between Procter Gamble and LOreal Co

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.6 times more return on investment than LOreal Co. However, Procter Gamble is 1.67 times less risky than LOreal Co. It trades about 0.08 of its potential returns per unit of risk. LOreal Co ADR is currently generating about -0.07 per unit of risk. If you would invest  14,262  in Procter Gamble on September 14, 2024 and sell it today you would earn a total of  2,844  from holding Procter Gamble or generate 19.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Procter Gamble  vs.  LOreal Co ADR

Procter Gamble

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LOreal Co ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOreal Co ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Procter Gamble and LOreal Co

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

The idea behind Procter Gamble and LOreal Co ADR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..