Correlation Between Agro Phos and Procter Gamble

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

By analyzing existing cross correlation between Agro Phos India and Procter Gamble Health, you can compare the effects of market volatilities on Agro Phos 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 Agro Phos with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agro Phos and Procter Gamble.

Diversification Opportunities for Agro Phos and Procter Gamble

-0.04

Correlation Coefficient

Agro Phos  Procter Gamble

Good diversification

The 3 months correlation between Agro and Procter is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Agro Phos India and Procter Gamble Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble Health and Agro Phos 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 Agro Phos India 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 Health has no effect on the direction of Agro Phos i.e., Agro Phos and Procter Gamble go up and down completely randomly.

Pair Corralation between Agro Phos and Procter Gamble

Assuming the 90 days trading horizon Agro Phos India is expected to under-perform the Procter Gamble. In addition to that, Agro Phos is 1.63 times more volatile than Procter Gamble Health. It trades about -0.07 of its total potential returns per unit of risk. Procter Gamble Health is currently generating about -0.02 per unit of volatility. If you would invest  524,476  in Procter Gamble Health on October 9, 2024 and sell it today you would lose (16,306) from holding Procter Gamble Health or give up 3.11% of portfolio value over 90 days.

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

Agro Phos India  vs.  Procter Gamble Health

Agro Phos India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agro Phos India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Procter Gamble Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Procter Gamble is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Agro Phos and Procter Gamble

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

The idea behind Agro Phos India and Procter Gamble Health 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.