Correlation Between Western Midstream and Procter Gamble

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

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

Diversification Opportunities for Western Midstream and Procter Gamble

0.55

Correlation Coefficient

Western Midstream  Procter Gamble

Very weak diversification

The 3 months correlation between Western and Procter is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Western Midstream 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 Western Midstream Partners are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Western Midstream i.e., Western Midstream and Procter Gamble go up and down completely randomly.

Pair Corralation between Western Midstream and Procter Gamble

Considering the 90-day investment horizon Western Midstream Partners is expected to generate 1.57 times more return on investment than Procter Gamble. However, Western Midstream is 1.57 times more volatile than Procter Gamble. It trades about 0.06 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.0 per unit of risk. If you would invest  3,775  in Western Midstream Partners on October 6, 2024 and sell it today you would earn a total of  149.00  from holding Western Midstream Partners or generate 3.95% return on investment over 90 days.

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

Western Midstream Partners  vs.  Procter Gamble

Western Midstream

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with Western Midstream and Procter Gamble

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

The idea behind Western Midstream Partners and Procter Gamble 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.