Correlation Between Clorox and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both Clorox 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 Clorox and Reckitt Benckiser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Clorox and Reckitt Benckiser Group, you can compare the effects of market volatilities on Clorox 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 Clorox with a short position of Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clorox and Reckitt Benckiser.
Diversification Opportunities for Clorox and Reckitt Benckiser
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Clorox and Reckitt is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser and Clorox 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 The Clorox 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 Clorox i.e., Clorox and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between Clorox and Reckitt Benckiser
Considering the 90-day investment horizon The Clorox is expected to under-perform the Reckitt Benckiser. But the stock apears to be less risky and, when comparing its historical volatility, The Clorox is 1.52 times less risky than Reckitt Benckiser. The stock trades about -0.1 of its potential returns per unit of risk. The Reckitt Benckiser Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,973 in Reckitt Benckiser Group on October 20, 2024 and sell it today you would earn a total of 31.00 from holding Reckitt Benckiser Group or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Clorox vs. Reckitt Benckiser Group
Performance |
| Timeline |
| Clorox |
| Reckitt Benckiser |
Clorox and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clorox and Reckitt Benckiser
The main advantage of trading using opposite Clorox and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clorox 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.| Clorox vs. Colgate Palmolive | Clorox vs. Procter Gamble | Clorox vs. Unilever PLC ADR | Clorox vs. Church Dwight |
| Reckitt Benckiser vs. Church Dwight | Reckitt Benckiser vs. Kimberly Clark de Mexico | Reckitt Benckiser vs. LOreal Co ADR | Reckitt Benckiser vs. Shiseido Company |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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