Correlation Between Indian Metals and Procter Gamble

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

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

Diversification Opportunities for Indian Metals and Procter Gamble

0.54

Correlation Coefficient

Indian Metals  Procter Gamble

Very weak diversification

The 3 months correlation between Indian and Procter is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro 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 Indian Metals 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 Indian Metals Ferro 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 Indian Metals i.e., Indian Metals and Procter Gamble go up and down completely randomly.

Pair Corralation between Indian Metals and Procter Gamble

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.48 times more return on investment than Procter Gamble. However, Indian Metals is 1.48 times more volatile than Procter Gamble Health. It trades about 0.18 of its potential returns per unit of risk. Procter Gamble Health is currently generating about 0.07 per unit of risk. If you would invest  65,832  in Indian Metals Ferro on October 23, 2024 and sell it today you would earn a total of  21,893  from holding Indian Metals Ferro or generate 33.26% return on investment over 90 days.

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

Indian Metals Ferro  vs.  Procter Gamble Health

Indian Metals Ferro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Indian Metals and Procter Gamble

The main advantage of trading using opposite Indian Metals and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals 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 Indian Metals Ferro 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.