Correlation Between Procter Gamble and Clorox

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

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

Diversification Opportunities for Procter Gamble and Clorox

0.57

Correlation Coefficient

Procter Gamble  Clorox

Very weak diversification

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

Pair Corralation between Procter Gamble and Clorox

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.89 times more return on investment than Clorox. However, Procter Gamble is 1.12 times less risky than Clorox. It trades about -0.04 of its potential returns per unit of risk. The Clorox is currently generating about -0.11 per unit of risk. If you would invest  16,768  in Procter Gamble on February 2, 2025 and sell it today you would lose (716.00) from holding Procter Gamble or give up 4.27% of portfolio value over 90 days.

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

Procter Gamble  vs.  The Clorox

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.

Clorox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Clorox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Procter Gamble and Clorox

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

The idea behind Procter Gamble and The Clorox 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.