Correlation Between Procter Gamble and Lifevantage

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

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

Diversification Opportunities for Procter Gamble and Lifevantage

-0.27

Correlation Coefficient

Procter Gamble  Lifevantage

Very good diversification

The 3 months correlation between Procter and Lifevantage is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of Procter Gamble i.e., Procter Gamble and Lifevantage go up and down completely randomly.

Pair Corralation between Procter Gamble and Lifevantage

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 20.19 times less return on investment than Lifevantage. But when comparing it to its historical volatility, Procter Gamble is 5.04 times less risky than Lifevantage. It trades about 0.06 of its potential returns per unit of risk. Lifevantage is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  768.00  in Lifevantage on September 3, 2024 and sell it today you would earn a total of  693.00  from holding Lifevantage or generate 90.23% return on investment over 90 days.

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

Procter Gamble  vs.  Lifevantage

Procter Gamble

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 4 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Lifevantage

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and Lifevantage

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

The idea behind Procter Gamble and Lifevantage 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.