Correlation Between Procter Gamble and Reckitt Benckiser

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

By analyzing existing cross correlation between Procter Gamble and Reckitt Benckiser Group, you can compare the effects of market volatilities on Procter Gamble and Reckitt Benckiser 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 Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Reckitt Benckiser.

Diversification Opportunities for Procter Gamble and Reckitt Benckiser

-0.13

Correlation Coefficient

Procter Gamble  Reckitt Benckiser

Good diversification

The 3 months correlation between Procter and Reckitt is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 are associated (or correlated) with Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Procter Gamble i.e., Procter Gamble and Reckitt Benckiser go up and down completely randomly.

Pair Corralation between Procter Gamble and Reckitt Benckiser

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 0.66 times more return on investment than Reckitt Benckiser. However, Procter Gamble is 1.51 times less risky than Reckitt Benckiser. It trades about 0.06 of its potential returns per unit of risk. Reckitt Benckiser Group is currently generating about -0.02 per unit of risk. If you would invest  12,574  in Procter Gamble on February 7, 2024 and sell it today you would earn a total of  3,870  from holding Procter Gamble or generate 30.78% return on investment over 90 days.

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

Procter Gamble  vs.  Reckitt Benckiser Group

Procter Gamble

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Reckitt Benckiser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reckitt Benckiser Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Procter Gamble and Reckitt Benckiser

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

The idea behind Procter Gamble and Reckitt Benckiser Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.