Correlation Between Procter Gamble and REC

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

Diversification Opportunities for Procter Gamble and REC

0.27

Correlation Coefficient

Procter Gamble  REC

Modest diversification

The 3 months correlation between Procter and REC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and REC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC 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 REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Limited has no effect on the direction of Procter Gamble i.e., Procter Gamble and REC go up and down completely randomly.

Pair Corralation between Procter Gamble and REC

Assuming the 90 days trading horizon Procter Gamble Health is expected to generate 0.83 times more return on investment than REC. However, Procter Gamble Health is 1.2 times less risky than REC. It trades about 0.07 of its potential returns per unit of risk. REC Limited is currently generating about 0.01 per unit of risk. If you would invest  523,794  in Procter Gamble Health on September 12, 2024 and sell it today you would earn a total of  36,681  from holding Procter Gamble Health or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Procter Gamble Health  vs.  REC Limited

Procter Gamble Health

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in January 2025.

REC Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in REC Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, REC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and REC

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

The idea behind Procter Gamble Health and REC 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.