Correlation Between Procter Gamble and Surge Components

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

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

Diversification Opportunities for Procter Gamble and Surge Components

-0.13

Correlation Coefficient

Procter Gamble  Surge Components

Good diversification

The 3 months correlation between Procter and Surge is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Surge Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Components 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 Surge Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Components has no effect on the direction of Procter Gamble i.e., Procter Gamble and Surge Components go up and down completely randomly.

Pair Corralation between Procter Gamble and Surge Components

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.3 times more return on investment than Surge Components. However, Procter Gamble is 3.29 times less risky than Surge Components. It trades about 0.02 of its potential returns per unit of risk. Surge Components is currently generating about -0.02 per unit of risk. If you would invest  15,732  in Procter Gamble on October 22, 2024 and sell it today you would earn a total of  381.00  from holding Procter Gamble or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Procter Gamble  vs.  Surge Components

Procter Gamble

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Surge Components

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Components has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Surge Components is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Procter Gamble and Surge Components

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

The idea behind Procter Gamble and Surge Components 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.