Correlation Between Philip Morris and Procter Gamble

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

Diversification Opportunities for Philip Morris and Procter Gamble

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Philip and Procter is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Philip Morris 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 Philip Morris International 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 Philip Morris i.e., Philip Morris and Procter Gamble go up and down completely randomly.

Pair Corralation between Philip Morris and Procter Gamble

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Procter Gamble. In addition to that, Philip Morris is 1.42 times more volatile than Procter Gamble. It trades about -0.32 of its total potential returns per unit of risk. Procter Gamble is currently generating about -0.29 per unit of volatility. If you would invest  13,563  in Procter Gamble on July 5, 2022 and sell it today you would lose (938.00)  from holding Procter Gamble or give up 6.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Philip Morris International  vs.  Procter Gamble

 Performance (%) 
       Timeline  
Philip Morris Intern 
Philip Performance
0 of 100
Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's primary indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Philip 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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Procter Price Channel

Philip Morris and Procter Gamble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Philip Morris and Procter Gamble

The main advantage of trading using opposite Philip Morris and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris 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.
Philip Morris vs. Amazon Inc
The idea behind Philip Morris International 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.
Procter Gamble vs. Amazon Inc
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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