Correlation Between Procter Gamble and Nike

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

Diversification Opportunities for Procter Gamble and Nike

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Procter and Nike is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Procter Gamble i.e., Procter Gamble and Nike go up and down completely randomly.

Pair Corralation between Procter Gamble and Nike

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.85 times more return on investment than Nike. However, Procter Gamble is 1.17 times less risky than Nike. It trades about 0.17 of its potential returns per unit of risk. Nike Inc is currently generating about 0.11 per unit of risk. If you would invest  14,064  in Procter Gamble on May 21, 2022 and sell it today you would earn a total of  913.00  from holding Procter Gamble or generate 6.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Procter Gamble  vs.  Nike Inc

 Performance (%) 
       Timeline  
Procter Gamble 
Procter Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Procter Price Channel

Nike Inc 
Nike Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Nike may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Nike Price Channel

Procter Gamble and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Procter Gamble and Nike

The main advantage of trading using opposite Procter Gamble and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.
The idea behind Procter Gamble and Nike Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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