Correlation Between Procter Gamble and Energizer Holdings

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

Diversification Opportunities for Procter Gamble and Energizer Holdings

0.64

Correlation Coefficient

Procter Gamble  Energizer Holdings

Poor diversification

The 3 months correlation between Procter and Energizer is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Energizer Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energizer Holdings 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 Energizer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energizer Holdings has no effect on the direction of Procter Gamble i.e., Procter Gamble and Energizer Holdings go up and down completely randomly.

Pair Corralation between Procter Gamble and Energizer Holdings

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.65 times more return on investment than Energizer Holdings. However, Procter Gamble is 1.55 times less risky than Energizer Holdings. It trades about -0.38 of its potential returns per unit of risk. Energizer Holdings is currently generating about -0.5 per unit of risk. If you would invest  17,511  in Procter Gamble on October 5, 2024 and sell it today you would lose (998.00) from holding Procter Gamble or give up 5.7% of portfolio value over 90 days.

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

Procter Gamble  vs.  Energizer Holdings

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

Energizer Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energizer Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Energizer Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Procter Gamble and Energizer Holdings

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

The idea behind Procter Gamble and Energizer Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.