Correlation Between Procter Gamble and Plexus Corp

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

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

Diversification Opportunities for Procter Gamble and Plexus Corp

0.12

Correlation Coefficient

Procter Gamble  Plexus Corp

Average diversification

The 3 months correlation between Procter and Plexus is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Procter Gamble i.e., Procter Gamble and Plexus Corp go up and down completely randomly.

Pair Corralation between Procter Gamble and Plexus Corp

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 3.3 times less return on investment than Plexus Corp. But when comparing it to its historical volatility, Procter Gamble is 2.03 times less risky than Plexus Corp. It trades about 0.04 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,315  in Plexus Corp on September 19, 2024 and sell it today you would earn a total of  6,416  from holding Plexus Corp or generate 62.2% return on investment over 90 days.

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

Procter Gamble  vs.  Plexus Corp

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.

Plexus Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and Plexus Corp

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

The idea behind Procter Gamble and Plexus Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.