Correlation Between Procter Gamble and Alkali Metals

Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Alkali Metals 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 Alkali Metals 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 Alkali Metals Limited, you can compare the effects of market volatilities on Procter Gamble and Alkali Metals 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 Alkali Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Alkali Metals.

Diversification Opportunities for Procter Gamble and Alkali Metals

0.23

Correlation Coefficient

Procter Gamble  Alkali Metals

Modest diversification

The 3 months correlation between Procter and Alkali is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and Alkali Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkali Metals 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 Alkali Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkali Metals Limited has no effect on the direction of Procter Gamble i.e., Procter Gamble and Alkali Metals go up and down completely randomly.

Pair Corralation between Procter Gamble and Alkali Metals

Assuming the 90 days trading horizon Procter Gamble Health is expected to generate 1.03 times more return on investment than Alkali Metals. However, Procter Gamble is 1.03 times more volatile than Alkali Metals Limited. It trades about 0.25 of its potential returns per unit of risk. Alkali Metals Limited is currently generating about 0.17 per unit of risk. If you would invest  505,769  in Procter Gamble Health on September 19, 2024 and sell it today you would earn a total of  47,091  from holding Procter Gamble Health or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Procter Gamble Health  vs.  Alkali Metals Limited

Procter Gamble Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and Alkali Metals

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

The idea behind Procter Gamble Health and Alkali Metals 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.