Correlation Between Procter Gamble and JSW Holdings

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

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

Diversification Opportunities for Procter Gamble and JSW Holdings

-0.01

Correlation Coefficient

Procter Gamble  JSW Holdings

Good diversification

The 3 months correlation between Procter and JSW is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and JSW Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Holdings Limited and Procter Gamble 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 Procter Gamble Health are associated (or correlated) with JSW Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Holdings Limited has no effect on the direction of Procter Gamble i.e., Procter Gamble and JSW Holdings go up and down completely randomly.

Pair Corralation between Procter Gamble and JSW Holdings

Assuming the 90 days trading horizon Procter Gamble is expected to generate 8.81 times less return on investment than JSW Holdings. But when comparing it to its historical volatility, Procter Gamble Health is 2.63 times less risky than JSW Holdings. It trades about 0.05 of its potential returns per unit of risk. JSW Holdings Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  632,675  in JSW Holdings Limited on September 2, 2024 and sell it today you would earn a total of  781,820  from holding JSW Holdings Limited or generate 123.57% return on investment over 90 days.

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

Procter Gamble Health  vs.  JSW Holdings Limited

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

JSW Holdings Limited

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and JSW Holdings

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

The idea behind Procter Gamble Health and JSW Holdings Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.