Correlation Between Procter Gamble and Aarti Drugs

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

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

Diversification Opportunities for Procter Gamble and Aarti Drugs

-0.24

Correlation Coefficient

Procter Gamble  Aarti Drugs

Very good diversification

The 3 months correlation between Procter and Aarti is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and Aarti Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarti Drugs Limited 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 Health are associated (or correlated) with Aarti Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarti Drugs Limited has no effect on the direction of Procter Gamble i.e., Procter Gamble and Aarti Drugs go up and down completely randomly.

Pair Corralation between Procter Gamble and Aarti Drugs

Assuming the 90 days trading horizon Procter Gamble Health is expected to generate 0.66 times more return on investment than Aarti Drugs. However, Procter Gamble Health is 1.51 times less risky than Aarti Drugs. It trades about 0.05 of its potential returns per unit of risk. Aarti Drugs Limited is currently generating about 0.01 per unit of risk. If you would invest  381,233  in Procter Gamble Health on October 3, 2024 and sell it today you would earn a total of  142,572  from holding Procter Gamble Health or generate 37.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Procter Gamble Health  vs.  Aarti Drugs Limited

Procter Gamble Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Procter Gamble and Aarti Drugs

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

The idea behind Procter Gamble Health and Aarti Drugs Limited 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 CEOs Directory module to screen CEOs from public companies around the world.