Correlation Between Reckitt Benckiser and Paramount Resources

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

Diversification Opportunities for Reckitt Benckiser and Paramount Resources

-0.43

Correlation Coefficient

Reckitt Benckiser  Paramount Resources

Very good diversification

The 3 months correlation between Reckitt and Paramount is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources 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 Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Reckitt Benckiser i.e., Reckitt Benckiser and Paramount Resources go up and down completely randomly.

Pair Corralation between Reckitt Benckiser and Paramount Resources

Assuming the 90 days horizon Reckitt Benckiser is expected to generate 10.08 times less return on investment than Paramount Resources. In addition to that, Reckitt Benckiser is 1.0 times more volatile than Paramount Resources. It trades about 0.01 of its total potential returns per unit of risk. Paramount Resources is currently generating about 0.09 per unit of volatility. If you would invest  2,148  in Paramount Resources on October 11, 2024 and sell it today you would earn a total of  64.00  from holding Paramount Resources or generate 2.98% return on investment over 90 days.

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

Reckitt Benckiser Group  vs.  Paramount Resources

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. Despite nearly stable basic indicators, Reckitt Benckiser is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Paramount Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Paramount Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Reckitt Benckiser and Paramount Resources

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

The idea behind Reckitt Benckiser Group and Paramount Resources 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.