Correlation Between Procter Gamble and First Trust
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and First Trust 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 Trust 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 Trust Exchange Traded, you can compare the effects of market volatilities on Procter Gamble and First Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and First Trust.
Diversification Opportunities for Procter Gamble and First Trust
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Procter and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Procter Gamble i.e., Procter Gamble and First Trust go up and down completely randomly.
Pair Corralation between Procter Gamble and First Trust
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.31 times more return on investment than First Trust. However, Procter Gamble is 2.31 times more volatile than First Trust Exchange Traded. It trades about 0.22 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.03 per unit of risk. If you would invest 16,930 in Procter Gamble on August 29, 2024 and sell it today you would earn a total of 1,006 from holding Procter Gamble or generate 5.94% 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. First Trust Exchange Traded
Performance |
| Timeline |
| Procter Gamble |
| First Trust Exchange |
Procter Gamble and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and First Trust
The main advantage of trading using opposite Procter Gamble and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble position performs unexpectedly, First Trust 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 Trust will offset losses from the drop in First Trust's long position.| Procter Gamble vs. The Clorox | Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Church Dwight | Procter Gamble vs. Kimberly Clark |
| First Trust vs. iShares MBS ETF | First Trust vs. iShares Core Total | First Trust vs. iShares 3 7 Year | First Trust vs. iShares 10 20 Year |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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