Correlation Between Procter Gamble and Formula Systems

Can any of the company-specific risk be diversified away by investing in both Procter Gamble and Formula Systems 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 Formula Systems 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 Formula Systems 1985, you can compare the effects of market volatilities on Procter Gamble and Formula Systems 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 Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Formula Systems.

Diversification Opportunities for Procter Gamble and Formula Systems

0.0

Correlation Coefficient

Procter Gamble  Formula Systems

Pay attention - limited upside

The 3 months correlation between Procter and Formula is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble Health and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 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 Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Procter Gamble i.e., Procter Gamble and Formula Systems go up and down completely randomly.

Pair Corralation between Procter Gamble and Formula Systems

If you would invest (100.00) in Procter Gamble Health on January 26, 2024 and sell it today you would earn a total of  100.00  from holding Procter Gamble Health or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Procter Gamble Health  vs.  Formula Systems 1985

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. Despite quite persistent fundamental indicators, Procter Gamble is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Formula Systems 1985

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and Formula Systems

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

The idea behind Procter Gamble Health and Formula Systems 1985 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.