Correlation Between Procter Gamble and Nu Skin

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

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

Diversification Opportunities for Procter Gamble and Nu Skin

0.56

Correlation Coefficient

Procter Gamble  Nu Skin

Very weak diversification

The 3 months correlation between Procter and NUS is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Nu Skin Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Skin Enterprises 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 Nu Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Skin Enterprises has no effect on the direction of Procter Gamble i.e., Procter Gamble and Nu Skin go up and down completely randomly.

Pair Corralation between Procter Gamble and Nu Skin

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.35 times more return on investment than Nu Skin. However, Procter Gamble is 2.89 times less risky than Nu Skin. It trades about 0.04 of its potential returns per unit of risk. Nu Skin Enterprises is currently generating about -0.12 per unit of risk. If you would invest  14,486  in Procter Gamble on September 25, 2024 and sell it today you would earn a total of  2,325  from holding Procter Gamble or generate 16.05% return on investment over 90 days.

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

Procter Gamble  vs.  Nu Skin Enterprises

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

Nu Skin Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Skin Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nu Skin is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Procter Gamble and Nu Skin

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

The idea behind Procter Gamble and Nu Skin Enterprises 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 Valuation module to check real value of public entities based on technical and fundamental data.