Correlation Between Indo Borax and Procter Gamble

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

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

Diversification Opportunities for Indo Borax and Procter Gamble

0.36

Correlation Coefficient

Indo Borax  Procter Gamble

Weak diversification

The 3 months correlation between Indo and Procter is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals 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 Indo Borax 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 Indo Borax Chemicals 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 Indo Borax i.e., Indo Borax and Procter Gamble go up and down completely randomly.

Pair Corralation between Indo Borax and Procter Gamble

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to under-perform the Procter Gamble. But the stock apears to be less risky and, when comparing its historical volatility, Indo Borax Chemicals is 1.1 times less risky than Procter Gamble. The stock trades about -0.36 of its potential returns per unit of risk. The Procter Gamble Health is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  534,685  in Procter Gamble Health on October 5, 2024 and sell it today you would lose (9,390) from holding Procter Gamble Health or give up 1.76% of portfolio value over 90 days.

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

Indo Borax Chemicals  vs.  Procter Gamble Health

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Procter Gamble Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indo Borax and Procter Gamble

The main advantage of trading using opposite Indo Borax and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indo Borax 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 Indo Borax Chemicals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.