Correlation Between Extended Dur and Procter Gamble

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

Diversification Opportunities for Extended Dur and Procter Gamble

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Extended and Procter is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Extended Dur Trs and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Extended Dur 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 Extended Dur Trs 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 Extended Dur i.e., Extended Dur and Procter Gamble go up and down completely randomly.

Pair Corralation between Extended Dur and Procter Gamble

Considering the 90-day investment horizon Extended Dur is expected to generate 11.61 times less return on investment than Procter Gamble. But when comparing it to its historical volatility, Extended Dur Trs is 1.01 times less risky than Procter Gamble. It trades about 0.0 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,433  in Procter Gamble on May 15, 2022 and sell it today you would earn a total of  234.00  from holding Procter Gamble or generate 1.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Extended Dur Trs  vs.  Procter Gamble

 Performance (%) 
       Timeline  
Extended Dur Trs 
Extended Performance
0 of 100
Over the last 90 days Extended Dur Trs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Extended Dur is not utilizing all of its potentials. The new stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Extended Price Channel

Procter Gamble 
Procter Performance
0 of 100
Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Procter Price Channel

Extended Dur and Procter Gamble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Extended Dur and Procter Gamble

The main advantage of trading using opposite Extended Dur and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Dur 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.

Extended Dur Trs

Pair trading matchups for Extended Dur

The idea behind Extended Dur Trs 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.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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