Correlation Between TATA SUMER and Procter Gamble

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

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

Diversification Opportunities for TATA SUMER and Procter Gamble

-0.12

Correlation Coefficient

TATA SUMER  Procter Gamble

Good diversification

The 3 months correlation between TATA and Procter is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding TATA SUMER PRODUCTS 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 TATA SUMER 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 TATA SUMER PRODUCTS 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 TATA SUMER i.e., TATA SUMER and Procter Gamble go up and down completely randomly.

Pair Corralation between TATA SUMER and Procter Gamble

Assuming the 90 days trading horizon TATA SUMER PRODUCTS is expected to generate 1.0 times more return on investment than Procter Gamble. However, TATA SUMER PRODUCTS is 1.0 times less risky than Procter Gamble. It trades about 0.06 of its potential returns per unit of risk. Procter Gamble Health is currently generating about 0.03 per unit of risk. If you would invest  67,535  in TATA SUMER PRODUCTS on October 5, 2024 and sell it today you would earn a total of  25,430  from holding TATA SUMER PRODUCTS or generate 37.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

TATA SUMER PRODUCTS  vs.  Procter Gamble Health

TATA SUMER PRODUCTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Procter Gamble Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with TATA SUMER and Procter Gamble

The main advantage of trading using opposite TATA SUMER and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TATA SUMER 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 TATA SUMER PRODUCTS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.