Correlation Between Procter Gamble and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and IShares Consumer 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 Consumer 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 Consumer Staples, you can compare the effects of market volatilities on Procter Gamble and IShares Consumer 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 Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and IShares Consumer.
Diversification Opportunities for Procter Gamble and IShares Consumer
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Procter and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples 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 Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of Procter Gamble i.e., Procter Gamble and IShares Consumer go up and down completely randomly.
Pair Corralation between Procter Gamble and IShares Consumer
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.44 times more return on investment than IShares Consumer. However, Procter Gamble is 1.44 times more volatile than iShares Consumer Staples. It trades about 0.07 of its potential returns per unit of risk. iShares Consumer Staples is currently generating about 0.04 per unit of risk. If you would invest 14,062 in Procter Gamble on August 27, 2024 and sell it today you would earn a total of 3,566 from holding Procter Gamble or generate 25.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. iShares Consumer Staples
Performance |
| Timeline |
| Procter Gamble |
| iShares Consumer Staples |
Procter Gamble and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and IShares Consumer
The main advantage of trading using opposite Procter Gamble and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, IShares Consumer 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 Consumer will offset losses from the drop in IShares Consumer'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 Consumer vs. Vanguard Consumer Discretionary | IShares Consumer vs. Vanguard Utilities Index | IShares Consumer vs. Vanguard Industrials Index | IShares Consumer vs. Vanguard Materials Index |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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