Correlation Between Procter Gamble and BF Investment

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

Diversification Opportunities for Procter Gamble and BF Investment

-0.05

Correlation Coefficient

Procter Gamble  BF Investment

Good diversification

The 3 months correlation between Procter and BFINVEST is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and BF Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BF Investment 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 BF Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BF Investment Limited has no effect on the direction of Procter Gamble i.e., Procter Gamble and BF Investment go up and down completely randomly.

Pair Corralation between Procter Gamble and BF Investment

Assuming the 90 days trading horizon Procter Gamble is expected to generate 32.16 times less return on investment than BF Investment. But when comparing it to its historical volatility, Procter Gamble Health is 1.82 times less risky than BF Investment. It trades about 0.01 of its potential returns per unit of risk. BF Investment Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  58,745  in BF Investment Limited on September 4, 2024 and sell it today you would earn a total of  15,260  from holding BF Investment Limited or generate 25.98% 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.  BF Investment 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

BF Investment Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, BF Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and BF Investment

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

The idea behind Procter Gamble Health and BF Investment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.