Correlation Between Procter Gamble and American Funds
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and American Funds 2045, you can compare the effects of market volatilities on Procter Gamble and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and American Funds.
Diversification Opportunities for Procter Gamble and American Funds
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Procter and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and American Funds 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2045 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2045 has no effect on the direction of Procter Gamble i.e., Procter Gamble and American Funds go up and down completely randomly.
Pair Corralation between Procter Gamble and American Funds
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.6 times more return on investment than American Funds. However, Procter Gamble is 2.6 times more volatile than American Funds 2045. It trades about 0.02 of its potential returns per unit of risk. American Funds 2045 is currently generating about 0.02 per unit of risk. If you would invest 16,966 in Procter Gamble on November 27, 2024 and sell it today you would earn a total of 88.00 from holding Procter Gamble or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. American Funds 2045
Performance |
| Timeline |
| Procter Gamble |
| American Funds 2045 |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Procter Gamble and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and American Funds
The main advantage of trading using opposite Procter Gamble and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Church Dwight |
| American Funds vs. Schwab Government Money | American Funds vs. Jpmorgan Trust I | American Funds vs. Franklin Government Money | American Funds vs. John Hancock Money |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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