Correlation Between Procter Gamble and CONSOLIDATED

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

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

Diversification Opportunities for Procter Gamble and CONSOLIDATED

0.27

Correlation Coefficient

Procter Gamble  CONSOLIDATED

Modest diversification

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

Pair Corralation between Procter Gamble and CONSOLIDATED

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 152.37 times less return on investment than CONSOLIDATED. But when comparing it to its historical volatility, Procter Gamble is 103.59 times less risky than CONSOLIDATED. It trades about 0.06 of its potential returns per unit of risk. CONSOLIDATED EDISON N is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,220  in CONSOLIDATED EDISON N on December 4, 2024 and sell it today you would earn a total of  80.00  from holding CONSOLIDATED EDISON N or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.12%
Values	Daily Returns

Procter Gamble  vs.  CONSOLIDATED EDISON N

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.

CONSOLIDATED EDISON

Risk-Adjusted Performance

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSOLIDATED 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 CONSOLIDATED

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

The idea behind Procter Gamble and CONSOLIDATED EDISON N 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.