Correlation Between Procter Gamble and Mc Endvrs

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

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

Diversification Opportunities for Procter Gamble and Mc Endvrs

-0.38

Correlation Coefficient

Procter Gamble  Mc Endvrs

Very good diversification

The 3 months correlation between Procter and MSMY is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Mc Endvrs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mc Endvrs 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 Mc Endvrs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mc Endvrs has no effect on the direction of Procter Gamble i.e., Procter Gamble and Mc Endvrs go up and down completely randomly.

Pair Corralation between Procter Gamble and Mc Endvrs

Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Mc Endvrs. But the stock apears to be less risky and, when comparing its historical volatility, Procter Gamble is 10.56 times less risky than Mc Endvrs. The stock trades about -0.02 of its potential returns per unit of risk. The Mc Endvrs is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Mc Endvrs on September 13, 2024 and sell it today you would lose (0.01) from holding Mc Endvrs or give up 12.5% of portfolio value over 90 days.

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

Procter Gamble  vs.  Mc Endvrs

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.

Mc Endvrs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mc Endvrs are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Mc Endvrs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and Mc Endvrs

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

The idea behind Procter Gamble and Mc Endvrs 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.