Correlation Between Hooker Furniture and Procter Gamble

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

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

Diversification Opportunities for Hooker Furniture and Procter Gamble

0.33

Correlation Coefficient

Hooker Furniture  Procter Gamble

Weak diversification

The 3 months correlation between Hooker and Procter is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Hooker Furniture 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 Hooker Furniture 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 has no effect on the direction of Hooker Furniture i.e., Hooker Furniture and Procter Gamble go up and down completely randomly.

Pair Corralation between Hooker Furniture and Procter Gamble

Given the investment horizon of 90 days Hooker Furniture is expected to under-perform the Procter Gamble. In addition to that, Hooker Furniture is 2.91 times more volatile than Procter Gamble. It trades about -0.01 of its total potential returns per unit of risk. Procter Gamble is currently generating about 0.04 per unit of volatility. If you would invest  14,357  in Procter Gamble on October 4, 2024 and sell it today you would earn a total of  2,408  from holding Procter Gamble or generate 16.77% return on investment over 90 days.

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

Hooker Furniture  vs.  Procter Gamble

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Hooker Furniture and Procter Gamble

The main advantage of trading using opposite Hooker Furniture and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hooker Furniture 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 Hooker Furniture and Procter Gamble 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.