Correlation Between Procter Gamble and First American
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and First American 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 First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and First American Funds, you can compare the effects of market volatilities on Procter Gamble and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and First American.
Diversification Opportunities for Procter Gamble and First American
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Procter Gamble i.e., Procter Gamble and First American go up and down completely randomly.
Pair Corralation between Procter Gamble and First American
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 12.86 times less return on investment than First American. But when comparing it to its historical volatility, Procter Gamble is 21.31 times less risky than First American. It trades about 0.05 of its potential returns per unit of risk. First American Funds is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 338.00 in First American Funds on September 3, 2024 and sell it today you would lose (238.00) from holding First American Funds or give up 70.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. First American Funds
Performance |
| Timeline |
| Procter Gamble |
| First American Funds |
Procter Gamble and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and First American
The main advantage of trading using opposite Procter Gamble and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Procter Gamble vs. Highway Holdings Limited | Procter Gamble vs. QCR Holdings | Procter Gamble vs. Partner Communications | Procter Gamble vs. Acumen Pharmaceuticals |
| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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