Correlation Between KRAKATAU STEEL and Procter Gamble

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

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

Diversification Opportunities for KRAKATAU STEEL and Procter Gamble

0.33

Correlation Coefficient

KRAKATAU STEEL  Procter Gamble

Weak diversification

The 3 months correlation between KRAKATAU and Procter is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and KRAKATAU STEEL 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 KRAKATAU STEEL B 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 has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Procter Gamble go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Procter Gamble

Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 9.95 times more return on investment than Procter Gamble. However, KRAKATAU STEEL is 9.95 times more volatile than The Procter Gamble. It trades about 0.06 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.1 per unit of risk. If you would invest  1.60  in KRAKATAU STEEL B on September 14, 2024 and sell it today you would lose (1.00) from holding KRAKATAU STEEL B or give up 62.5% of portfolio value over 90 days.

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

KRAKATAU STEEL B   vs.  The Procter Gamble

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Procter Gamble are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KRAKATAU STEEL and Procter Gamble

The main advantage of trading using opposite KRAKATAU STEEL and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRAKATAU STEEL 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 KRAKATAU STEEL B and The Procter Gamble 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.