Correlation Between Spencers Retail and Procter Gamble

Can any of the company-specific risk be diversified away by investing in both Spencers Retail and Procter Gamble 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 Spencers Retail and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spencers Retail Limited and Procter Gamble Health, you can compare the effects of market volatilities on Spencers Retail and Procter Gamble 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 Spencers Retail with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spencers Retail and Procter Gamble.

Diversification Opportunities for Spencers Retail and Procter Gamble

0.05

Correlation Coefficient

Spencers Retail  Procter Gamble

Significant diversification

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

Pair Corralation between Spencers Retail and Procter Gamble

Assuming the 90 days trading horizon Spencers Retail Limited is expected to generate 2.03 times more return on investment than Procter Gamble. However, Spencers Retail is 2.03 times more volatile than Procter Gamble Health. It trades about 0.03 of its potential returns per unit of risk. Procter Gamble Health is currently generating about 0.05 per unit of risk. If you would invest  7,155  in Spencers Retail Limited on October 11, 2024 and sell it today you would earn a total of  1,662  from holding Spencers Retail Limited or generate 23.23% return on investment over 90 days.

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

Spencers Retail Limited  vs.  Procter Gamble Health

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Spencers Retail and Procter Gamble

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

The idea behind Spencers Retail Limited and Procter Gamble Health 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.