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 Global, 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

0.13

Correlation Coefficient

Procter Gamble  First Trust

Average diversification

The 3 months correlation between Procter and First is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global 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 Global 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 2.84 times less return on investment than First Trust. In addition to that, Procter Gamble is 2.09 times more volatile than First Trust Global. It trades about 0.03 of its total potential returns per unit of risk. First Trust Global is currently generating about 0.16 per unit of volatility. If you would invest  2,390  in First Trust Global on December 28, 2024 and sell it today you would earn a total of  143.00  from holding First Trust Global or generate 5.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Procter Gamble  vs.  First Trust Global

Procter Gamble

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

The idea behind Procter Gamble and First Trust Global 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.