Correlation Between Procter Gamble and Textron

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

Diversification Opportunities for Procter Gamble and Textron

-0.32

Correlation Coefficient

Procter Gamble  Textron

Very good diversification

The 3 months correlation between Procter and Textron is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble DRC and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Procter Gamble i.e., Procter Gamble and Textron go up and down completely randomly.

Pair Corralation between Procter Gamble and Textron

Assuming the 90 days horizon Procter Gamble DRC is expected to under-perform the Textron. In addition to that, Procter Gamble is 229.91 times more volatile than Textron. It trades about -0.26 of its total potential returns per unit of risk. Textron is currently generating about 0.22 per unit of volatility. If you would invest  165,495  in Textron on September 24, 2024 and sell it today you would earn a total of  40.00  from holding Textron or generate 0.02% 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.  Textron

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.

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Textron 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 Textron

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

The idea behind Procter Gamble DRC and Textron 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.