Correlation Between Procter Gamble and Walmart

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

Diversification Opportunities for Procter Gamble and Walmart

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Procter and Walmart is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Procter Gamble i.e., Procter Gamble and Walmart go up and down completely randomly.

Pair Corralation between Procter Gamble and Walmart

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.64 times more return on investment than Walmart. However, Procter Gamble is 1.56 times less risky than Walmart. It trades about 0.13 of its potential returns per unit of risk. Walmart is currently generating about 0.08 per unit of risk. If you would invest  16,005  in Procter Gamble on December 30, 2023 and sell it today you would earn a total of  220.00  from holding Procter Gamble or generate 1.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Procter Gamble  vs.  Walmart

 Performance 
       Timeline  
Procter Gamble 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Walmart 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and Walmart

The main advantage of trading using opposite Procter Gamble and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.
The idea behind Procter Gamble and Walmart 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.
Check out your portfolio center.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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