Correlation Between IShares Trust and Procter Gamble

Can any of the company-specific risk be diversified away by investing in both IShares Trust and Procter Gamble 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 IShares Trust and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Trust and The Procter Gamble, you can compare the effects of market volatilities on IShares Trust and Procter Gamble 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 IShares Trust with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Procter Gamble.

Diversification Opportunities for IShares Trust and Procter Gamble

0.58

Correlation Coefficient

IShares Trust  Procter Gamble

Very weak diversification

The 3 months correlation between IShares and Procter is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and IShares Trust 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 iShares Trust are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of IShares Trust i.e., IShares Trust and Procter Gamble go up and down completely randomly.

Pair Corralation between IShares Trust and Procter Gamble

Assuming the 90 days trading horizon iShares Trust is expected to generate 0.93 times more return on investment than Procter Gamble. However, iShares Trust is 1.07 times less risky than Procter Gamble. It trades about 0.2 of its potential returns per unit of risk. The Procter Gamble is currently generating about 0.16 per unit of risk. If you would invest  8,869  in iShares Trust on September 2, 2024 and sell it today you would earn a total of  1,481  from holding iShares Trust or generate 16.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

iShares Trust   vs.  The Procter Gamble

iShares Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Procter Gamble are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Procter Gamble sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and Procter Gamble

The main advantage of trading using opposite IShares Trust and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.

The idea behind iShares Trust and The Procter Gamble pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.