Correlation Between Procter Gamble and CLS Holdings

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

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

Diversification Opportunities for Procter Gamble and CLS Holdings

0.33

Correlation Coefficient

Procter Gamble  CLS Holdings

Weak diversification

The 3 months correlation between Procter and CLS is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and CLS Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLS Holdings USA 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 are associated (or correlated) with CLS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLS Holdings USA has no effect on the direction of Procter Gamble i.e., Procter Gamble and CLS Holdings go up and down completely randomly.

Pair Corralation between Procter Gamble and CLS Holdings

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.12 times more return on investment than CLS Holdings. However, Procter Gamble is 8.44 times less risky than CLS Holdings. It trades about -0.03 of its potential returns per unit of risk. CLS Holdings USA is currently generating about -0.01 per unit of risk. If you would invest  17,861  in Procter Gamble on December 2, 2024 and sell it today you would lose (477.00) from holding Procter Gamble or give up 2.67% of portfolio value over 90 days.

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

Procter Gamble  vs.  CLS Holdings USA

Procter Gamble

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

CLS Holdings USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLS Holdings USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CLS Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Procter Gamble and CLS Holdings

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

The idea behind Procter Gamble and CLS Holdings USA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.