Correlation Between Procter Gamble and Murchison Minerals

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

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

Diversification Opportunities for Procter Gamble and Murchison Minerals

0.55

Correlation Coefficient

Procter Gamble  Murchison Minerals

Very weak diversification

The 3 months correlation between Procter and Murchison is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Murchison Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murchison Minerals 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 Murchison Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murchison Minerals has no effect on the direction of Procter Gamble i.e., Procter Gamble and Murchison Minerals go up and down completely randomly.

Pair Corralation between Procter Gamble and Murchison Minerals

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 33.16 times less return on investment than Murchison Minerals. But when comparing it to its historical volatility, Procter Gamble is 11.77 times less risky than Murchison Minerals. It trades about 0.02 of its potential returns per unit of risk. Murchison Minerals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.05  in Murchison Minerals on December 3, 2024 and sell it today you would lose (0.16) from holding Murchison Minerals or give up 15.24% of portfolio value over 90 days.

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

Procter Gamble  vs.  Murchison Minerals

Procter Gamble

Risk-Adjusted Performance

Very 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.

Murchison Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Murchison Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Murchison Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and Murchison Minerals

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

The idea behind Procter Gamble and Murchison Minerals 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.