Correlation Between Procter Gamble and Maxwell Resource

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

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

Diversification Opportunities for Procter Gamble and Maxwell Resource

-0.42

Correlation Coefficient

Procter Gamble  Maxwell Resource

Very good diversification

The 3 months correlation between Procter and Maxwell is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Maxwell Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxwell Resource and Procter Gamble 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 Procter Gamble are associated (or correlated) with Maxwell Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxwell Resource has no effect on the direction of Procter Gamble i.e., Procter Gamble and Maxwell Resource go up and down completely randomly.

Pair Corralation between Procter Gamble and Maxwell Resource

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 247.81 times less return on investment than Maxwell Resource. But when comparing it to its historical volatility, Procter Gamble is 42.36 times less risky than Maxwell Resource. It trades about 0.02 of its potential returns per unit of risk. Maxwell Resource is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.70  in Maxwell Resource on December 29, 2024 and sell it today you would earn a total of  1.30  from holding Maxwell Resource or generate 76.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Procter Gamble  vs.  Maxwell Resource

Procter Gamble

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Maxwell Resource

Risk-Adjusted Performance

Weak

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

Pair Trading with Procter Gamble and Maxwell Resource

The main advantage of trading using opposite Procter Gamble and Maxwell Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, Maxwell Resource 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 Maxwell Resource will offset losses from the drop in Maxwell Resource's long position.

The idea behind Procter Gamble and Maxwell Resource 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.