Correlation Between JSW Steel and Procter Gamble

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

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

Diversification Opportunities for JSW Steel and Procter Gamble

0.27

Correlation Coefficient

JSW Steel  Procter Gamble

Modest diversification

The 3 months correlation between JSW and Procter is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited 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 JSW Steel 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 JSW Steel Limited 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 JSW Steel i.e., JSW Steel and Procter Gamble go up and down completely randomly.

Pair Corralation between JSW Steel and Procter Gamble

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the Procter Gamble. But the stock apears to be less risky and, when comparing its historical volatility, JSW Steel Limited is 1.19 times less risky than Procter Gamble. The stock trades about -0.11 of its potential returns per unit of risk. The Procter Gamble Health is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  517,289  in Procter Gamble Health on October 7, 2024 and sell it today you would earn a total of  3,106  from holding Procter Gamble Health or generate 0.6% return on investment over 90 days.

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

JSW Steel Limited  vs.  Procter Gamble Health

JSW Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 JSW Steel and Procter Gamble

The main advantage of trading using opposite JSW Steel and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSW Steel 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 JSW Steel Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.