Correlation Between Procter Gamble and Rolls

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

By analyzing existing cross correlation between Procter Gamble and Rolls Royce Holdings 3625, you can compare the effects of market volatilities on Procter Gamble and Rolls 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 Rolls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Rolls.

Diversification Opportunities for Procter Gamble and Rolls

-0.09

Correlation Coefficient

Procter Gamble  Rolls

Good diversification

The 3 months correlation between Procter and Rolls is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Rolls Royce Holdings 3625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings 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 Rolls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of Procter Gamble i.e., Procter Gamble and Rolls go up and down completely randomly.

Pair Corralation between Procter Gamble and Rolls

Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the Rolls. In addition to that, Procter Gamble is 12.86 times more volatile than Rolls Royce Holdings 3625. It trades about -0.05 of its total potential returns per unit of risk. Rolls Royce Holdings 3625 is currently generating about 0.11 per unit of volatility. If you would invest  9,875  in Rolls Royce Holdings 3625 on November 28, 2024 and sell it today you would earn a total of  30.00  from holding Rolls Royce Holdings 3625 or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.85%
Values	Daily Returns

Procter Gamble  vs.  Rolls Royce Holdings 3625

Procter Gamble

Risk-Adjusted Performance

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.

Rolls Royce Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings 3625 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Rolls is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and Rolls

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

The idea behind Procter Gamble and Rolls Royce Holdings 3625 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..