Correlation Between Procter Gamble and Lennar

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

By analyzing existing cross correlation between Procter Gamble and Lennar 475 percent, you can compare the effects of market volatilities on Procter Gamble and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Lennar.

Diversification Opportunities for Procter Gamble and Lennar

0.25

Correlation Coefficient

Procter Gamble  Lennar

Modest diversification

The 3 months correlation between Procter and Lennar is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Lennar 475 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 475 percent 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar 475 percent has no effect on the direction of Procter Gamble i.e., Procter Gamble and Lennar go up and down completely randomly.

Pair Corralation between Procter Gamble and Lennar

Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Lennar. In addition to that, Procter Gamble is 3.17 times more volatile than Lennar 475 percent. It trades about -0.02 of its total potential returns per unit of risk. Lennar 475 percent is currently generating about -0.03 per unit of volatility. If you would invest  10,133  in Lennar 475 percent on September 28, 2024 and sell it today you would lose (63.00) from holding Lennar 475 percent or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Procter Gamble  vs.  Lennar 475 percent

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lennar 475 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar 475 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lennar is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and Lennar

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

The idea behind Procter Gamble and Lennar 475 percent 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..