Correlation Between EAFE Small-Cap and Procter Gamble

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Can any of the company-specific risk be diversified away by investing in both EAFE Small-Cap 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 EAFE Small-Cap and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAFE Small-Cap Ishares and Procter Gamble, you can compare the effects of market volatilities on EAFE Small-Cap 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 EAFE Small-Cap with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAFE Small-Cap and Procter Gamble.

Diversification Opportunities for EAFE Small-Cap and Procter Gamble

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between EAFE Small-Cap and Procter is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding EAFE Small-Cap Ishares and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and EAFE Small-Cap 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 EAFE Small-Cap Ishares 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 EAFE Small-Cap i.e., EAFE Small-Cap and Procter Gamble go up and down completely randomly.

Pair Corralation between EAFE Small-Cap and Procter Gamble

Considering the 90-day investment horizon EAFE Small-Cap Ishares is expected to under-perform the Procter Gamble. But the etf apears to be less risky and, when comparing its historical volatility, EAFE Small-Cap Ishares is 1.04 times less risky than Procter Gamble. The etf trades about -0.29 of its potential returns per unit of risk. The Procter Gamble is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  14,564  in Procter Gamble on April 2, 2022 and sell it today you would lose (79.00)  from holding Procter Gamble or give up 0.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

EAFE Small-Cap Ishares  vs.  Procter Gamble

 Performance (%) 
      Timeline 
EAFE Small-Cap Ishares 
EAFE Small-Cap Performance
0 of 100
Over the last 90 days EAFE Small-Cap Ishares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the ETF investors.

EAFE Small-Cap Price Channel

Procter Gamble 
Procter Performance
0 of 100
Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0276
Payout Ratio
0.61
Last Split Factor
2:1
Forward Annual Dividend Rate
3.65
Dividend Date
2022-05-16
Ex Dividend Date
2022-04-21
Last Split Date
2004-06-21

Procter Price Channel

EAFE Small-Cap and Procter Gamble Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EAFE Small-Cap and Procter Gamble

The main advantage of trading using opposite EAFE Small-Cap and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAFE Small-Cap 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 EAFE Small-Cap Ishares and 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.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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