Correlation Between Procter Gamble and LOral SA

Can any of the company-specific risk be diversified away by investing in both Procter Gamble and LOral SA 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 LOral SA 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 LOral SA, you can compare the effects of market volatilities on Procter Gamble and LOral SA 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 LOral SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and LOral SA.

Diversification Opportunities for Procter Gamble and LOral SA

0.27

Correlation Coefficient

Procter Gamble  LOral SA

Modest diversification

The 3 months correlation between Procter and LOral is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA 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 LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of Procter Gamble i.e., Procter Gamble and LOral SA go up and down completely randomly.

Pair Corralation between Procter Gamble and LOral SA

Assuming the 90 days horizon Procter Gamble DRC is expected to generate 1.75 times more return on investment than LOral SA. However, Procter Gamble is 1.75 times more volatile than LOral SA. It trades about 0.05 of its potential returns per unit of risk. LOral SA is currently generating about 0.03 per unit of risk. If you would invest  335,994  in Procter Gamble DRC on September 14, 2024 and sell it today you would earn a total of  12,006  from holding Procter Gamble DRC or generate 3.57% return on investment over 90 days.

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

Procter Gamble DRC  vs.  LOral SA

Procter Gamble DRC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble DRC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

LOral SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LOral SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, LOral SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and LOral SA

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

The idea behind Procter Gamble DRC and LOral SA 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.