Correlation Between Reckitt Benckiser and Kimberly Clark

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

By analyzing existing cross correlation between Reckitt Benckiser Group and Kimberly Clark, you can compare the effects of market volatilities on Reckitt Benckiser and Kimberly Clark 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 Reckitt Benckiser with a short position of Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and Kimberly Clark.

Diversification Opportunities for Reckitt Benckiser and Kimberly Clark

0.1

Correlation Coefficient

Reckitt Benckiser  Kimberly Clark

Average diversification

The 3 months correlation between Reckitt and Kimberly is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark and Reckitt Benckiser 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 Reckitt Benckiser Group are associated (or correlated) with Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of Reckitt Benckiser i.e., Reckitt Benckiser and Kimberly Clark go up and down completely randomly.

Pair Corralation between Reckitt Benckiser and Kimberly Clark

Assuming the 90 days horizon Reckitt Benckiser Group is expected to generate 1.09 times more return on investment than Kimberly Clark. However, Reckitt Benckiser is 1.09 times more volatile than Kimberly Clark. It trades about -0.14 of its potential returns per unit of risk. Kimberly Clark is currently generating about -0.27 per unit of risk. If you would invest  1,239  in Reckitt Benckiser Group on September 27, 2024 and sell it today you would lose (33.00) from holding Reckitt Benckiser Group or give up 2.66% of portfolio value over 90 days.

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

Reckitt Benckiser Group  vs.  Kimberly Clark

Reckitt Benckiser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reckitt Benckiser Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Reckitt Benckiser is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kimberly Clark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Reckitt Benckiser and Kimberly Clark

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

The idea behind Reckitt Benckiser Group and Kimberly Clark 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.