Correlation Between Procter Gamble and Compania

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

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

Diversification Opportunities for Procter Gamble and Compania

-0.02

Correlation Coefficient

Procter Gamble  Compania

Good diversification

The 3 months correlation between Procter and Compania is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 DRC are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Procter Gamble i.e., Procter Gamble and Compania go up and down completely randomly.

Pair Corralation between Procter Gamble and Compania

Assuming the 90 days horizon Procter Gamble is expected to generate 1.22 times less return on investment than Compania. But when comparing it to its historical volatility, Procter Gamble DRC is 2.76 times less risky than Compania. It trades about 0.08 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  222,500  in Compania de Transporte on November 28, 2024 and sell it today you would earn a total of  9,000  from holding Compania de Transporte or generate 4.04% return on investment over 90 days.

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

Procter Gamble DRC  vs.  Compania de Transporte

Procter Gamble DRC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble DRC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Compania de Transporte

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Procter Gamble and Compania

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

The idea behind Procter Gamble DRC and Compania de Transporte 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.