Correlation Between Procter Gamble and IShares Financial
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and IShares Financial 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 IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and iShares Financial Services, you can compare the effects of market volatilities on Procter Gamble and IShares Financial 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 IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and IShares Financial.
Diversification Opportunities for Procter Gamble and IShares Financial
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Procter and IShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial 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 IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of Procter Gamble i.e., Procter Gamble and IShares Financial go up and down completely randomly.
Pair Corralation between Procter Gamble and IShares Financial
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.04 times less return on investment than IShares Financial. But when comparing it to its historical volatility, Procter Gamble is 1.15 times less risky than IShares Financial. It trades about 0.05 of its potential returns per unit of risk. iShares Financial Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,161 in iShares Financial Services on August 27, 2024 and sell it today you would earn a total of 2,985 from holding iShares Financial Services or generate 57.84% 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. iShares Financial Services
Performance |
| Timeline |
| Procter Gamble |
| iShares Financial |
Procter Gamble and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and IShares Financial
The main advantage of trading using opposite Procter Gamble and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, IShares Financial 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 IShares Financial will offset losses from the drop in IShares Financial's long position.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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