Correlation Between Procter Gamble and MIC Electronics

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

Diversification Opportunities for Procter Gamble and MIC Electronics

0.26

Correlation Coefficient

Procter Gamble  MIC Electronics

Modest diversification

The 3 months correlation between Procter and MIC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics 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 MIC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIC Electronics has no effect on the direction of Procter Gamble i.e., Procter Gamble and MIC Electronics go up and down completely randomly.

Pair Corralation between Procter Gamble and MIC Electronics

Assuming the 90 days trading horizon Procter Gamble Health is expected to generate 0.9 times more return on investment than MIC Electronics. However, Procter Gamble Health is 1.11 times less risky than MIC Electronics. It trades about 0.08 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.08 per unit of risk. If you would invest  499,754  in Procter Gamble Health on August 31, 2024 and sell it today you would earn a total of  17,101  from holding Procter Gamble Health or generate 3.42% 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.  MIC Electronics 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.

MIC Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MIC Electronics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, MIC Electronics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Procter Gamble and MIC Electronics

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

The idea behind Procter Gamble Health and MIC Electronics 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.