Correlation Between General Insurance and Procter Gamble

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

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

Diversification Opportunities for General Insurance and Procter Gamble

0.6

Correlation Coefficient

General Insurance  Procter Gamble

Poor diversification

The 3 months correlation between General and Procter is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance 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 General Insurance 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 General Insurance 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 General Insurance i.e., General Insurance and Procter Gamble go up and down completely randomly.

Pair Corralation between General Insurance and Procter Gamble

Assuming the 90 days trading horizon General Insurance is expected to generate 1.12 times more return on investment than Procter Gamble. However, General Insurance is 1.12 times more volatile than Procter Gamble Health. It trades about 0.12 of its potential returns per unit of risk. Procter Gamble Health is currently generating about 0.09 per unit of risk. If you would invest  38,400  in General Insurance on September 19, 2024 and sell it today you would earn a total of  5,665  from holding General Insurance or generate 14.75% return on investment over 90 days.

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

General Insurance  vs.  Procter Gamble Health

General Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with General Insurance and Procter Gamble

The main advantage of trading using opposite General Insurance and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Insurance 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 General Insurance 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.