Correlation Between NIKE and Procter Gamble

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Can any of the company-specific risk be diversified away by investing in both NIKE 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 NIKE and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NIKE Inc and Procter Gamble DRC, you can compare the effects of market volatilities on NIKE 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 NIKE with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and Procter Gamble.

Diversification Opportunities for NIKE and Procter Gamble

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between NIKE and Procter is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc and Procter Gamble DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble DRC and NIKE 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 NIKE Inc 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 DRC has no effect on the direction of NIKE i.e., NIKE and Procter Gamble go up and down completely randomly.

Pair Corralation between NIKE and Procter Gamble

Assuming the 90 days trading horizon NIKE Inc is expected to under-perform the Procter Gamble. In addition to that, NIKE is 1.35 times more volatile than Procter Gamble DRC. It trades about -0.19 of its total potential returns per unit of risk. Procter Gamble DRC is currently generating about 0.05 per unit of volatility. If you would invest  1,157,900  in Procter Gamble DRC on December 29, 2023 and sell it today you would earn a total of  19,350  from holding Procter Gamble DRC or generate 1.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NIKE Inc  vs.  Procter Gamble DRC

 Performance 
       Timeline  
NIKE Inc 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days NIKE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, NIKE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Procter Gamble DRC 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Procter Gamble DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

NIKE and Procter Gamble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NIKE and Procter Gamble

The main advantage of trading using opposite NIKE and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE 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 NIKE Inc and Procter Gamble DRC 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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