Correlation Between Procter Gamble and IShares

Can any of the company-specific risk be diversified away by investing in both Procter Gamble and IShares 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 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, you can compare the effects of market volatilities on Procter Gamble and IShares 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and IShares.

Diversification Opportunities for Procter Gamble and IShares

-0.39

Correlation Coefficient

Procter Gamble  IShares

Very good diversification

The 3 months correlation between Procter and IShares is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Procter Gamble i.e., Procter Gamble and IShares go up and down completely randomly.

Pair Corralation between Procter Gamble and IShares

Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.62 times less return on investment than IShares. But when comparing it to its historical volatility, Procter Gamble is 1.39 times less risky than IShares. It trades about 0.04 of its potential returns per unit of risk. IShares is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,511  in IShares on September 12, 2024 and sell it today you would earn a total of  640.00  from holding IShares or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.83%
Values	Daily Returns

Procter Gamble  vs.  IShares

Procter Gamble

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, IShares is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Procter Gamble and IShares

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

The idea behind Procter Gamble and IShares 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.