Correlation Between Procter Gamble and Inter Parfums

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

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

Diversification Opportunities for Procter Gamble and Inter Parfums

0.2

Correlation Coefficient

Procter Gamble  Inter Parfums

Modest diversification

The 3 months correlation between Procter and Inter is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Procter Gamble i.e., Procter Gamble and Inter Parfums go up and down completely randomly.

Pair Corralation between Procter Gamble and Inter Parfums

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.05 times less return on investment than Inter Parfums. But when comparing it to its historical volatility, Procter Gamble is 2.2 times less risky than Inter Parfums. It trades about 0.05 of its potential returns per unit of risk. Inter Parfums is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,538  in Inter Parfums on November 19, 2024 and sell it today you would earn a total of  1,738  from holding Inter Parfums or generate 15.06% 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  vs.  Inter Parfums

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.

Inter Parfums

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Inter Parfums may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Procter Gamble and Inter Parfums

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

The idea behind Procter Gamble and Inter Parfums 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.