Correlation Between Procter Gamble and Kenvue

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

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

Diversification Opportunities for Procter Gamble and Kenvue

0.6

Correlation Coefficient

Procter Gamble  Kenvue

Poor diversification

The 3 months correlation between Procter and Kenvue is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of Procter Gamble i.e., Procter Gamble and Kenvue go up and down completely randomly.

Pair Corralation between Procter Gamble and Kenvue

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 5.75 times less return on investment than Kenvue. But when comparing it to its historical volatility, Procter Gamble is 1.11 times less risky than Kenvue. It trades about 0.03 of its potential returns per unit of risk. Kenvue Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,097  in Kenvue Inc on December 29, 2024 and sell it today you would earn a total of  253.00  from holding Kenvue Inc or generate 12.06% return on investment over 90 days.

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

Procter Gamble  vs.  Kenvue Inc

Procter Gamble

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kenvue Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenvue Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Kenvue may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Procter Gamble and Kenvue

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

The idea behind Procter Gamble and Kenvue Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.