Correlation Between Procter Gamble and Shiseido Company

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

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

Diversification Opportunities for Procter Gamble and Shiseido Company

0.57

Correlation Coefficient

Procter Gamble  Shiseido Company

Very weak diversification

The 3 months correlation between Procter and Shiseido is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Shiseido Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiseido Company 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 Shiseido Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiseido Company has no effect on the direction of Procter Gamble i.e., Procter Gamble and Shiseido Company go up and down completely randomly.

Pair Corralation between Procter Gamble and Shiseido Company

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.43 times more return on investment than Shiseido Company. However, Procter Gamble is 2.32 times less risky than Shiseido Company. It trades about 0.16 of its potential returns per unit of risk. Shiseido Company is currently generating about 0.05 per unit of risk. If you would invest  15,963  in Procter Gamble on December 5, 2024 and sell it today you would earn a total of  1,355  from holding Procter Gamble or generate 8.49% 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.  Shiseido Company

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.

Shiseido Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shiseido Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Shiseido Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and Shiseido Company

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

The idea behind Procter Gamble and Shiseido Company 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.