Correlation Between Procter Gamble and Vanguard Long-Term

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

Diversification Opportunities for Procter Gamble and Vanguard Long-Term

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Procter and Vanguard is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Vanguard Long-Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long-Term Bond 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 Vanguard Long-Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long-Term Bond has no effect on the direction of Procter Gamble i.e., Procter Gamble and Vanguard Long-Term go up and down completely randomly.

Pair Corralation between Procter Gamble and Vanguard Long-Term

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.42 times less return on investment than Vanguard Long-Term. But when comparing it to its historical volatility, Procter Gamble is 1.19 times less risky than Vanguard Long-Term. It trades about 0.41 of its potential returns per unit of risk. Vanguard Long-Term Bond is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  6,755  in Vanguard Long-Term Bond on September 8, 2022 and sell it today you would earn a total of  918.00  from holding Vanguard Long-Term Bond or generate 13.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Procter Gamble  vs.  Vanguard Long-Term Bond

 Performance (%) 
       Timeline  
Procter Gamble 
Procter Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Procter Price Channel

Vanguard Long-Term Bond 
Vanguard Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long-Term Bond are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Vanguard Long-Term is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard Price Channel

Procter Gamble and Vanguard Long-Term Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and Vanguard Long-Term

The main advantage of trading using opposite Procter Gamble and Vanguard Long-Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Vanguard Long-Term 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 Vanguard Long-Term will offset losses from the drop in Vanguard Long-Term's long position.
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The idea behind Procter Gamble and Vanguard Long-Term Bond 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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