Correlation Between Boeing and Procter Gamble

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

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

Diversification Opportunities for Boeing and Procter Gamble

0.34

Correlation Coefficient

Boeing  Procter Gamble

Weak diversification

The 3 months correlation between Boeing and Procter is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Procter Gamble DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble DRC and Boeing 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 The Boeing 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 DRC has no effect on the direction of Boeing i.e., Boeing and Procter Gamble go up and down completely randomly.

Pair Corralation between Boeing and Procter Gamble

Assuming the 90 days horizon The Boeing is expected to generate 1.51 times more return on investment than Procter Gamble. However, Boeing is 1.51 times more volatile than Procter Gamble DRC. It trades about 0.19 of its potential returns per unit of risk. Procter Gamble DRC is currently generating about 0.01 per unit of risk. If you would invest  310,618  in The Boeing on September 23, 2024 and sell it today you would earn a total of  50,882  from holding The Boeing or generate 16.38% return on investment over 90 days.

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

The Boeing  vs.  Procter Gamble DRC

Boeing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Boeing showed solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boeing and Procter Gamble

The main advantage of trading using opposite Boeing and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 The Boeing and Procter Gamble DRC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.