Correlation Between Acco Brands and Church Dwight

Can any of the company-specific risk be diversified away by investing in both Acco Brands and Church Dwight 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 Acco Brands and Church Dwight into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acco Brands and Church Dwight, you can compare the effects of market volatilities on Acco Brands and Church Dwight 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 Acco Brands with a short position of Church Dwight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acco Brands and Church Dwight.

Diversification Opportunities for Acco Brands and Church Dwight

0.74

Correlation Coefficient

Acco Brands  Church Dwight

Poor diversification

The 3 months correlation between Acco and Church is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Acco Brands and Church Dwight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight and Acco Brands 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 Acco Brands are associated (or correlated) with Church Dwight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Church Dwight has no effect on the direction of Acco Brands i.e., Acco Brands and Church Dwight go up and down completely randomly.

Pair Corralation between Acco Brands and Church Dwight

Given the investment horizon of 90 days Acco Brands is expected to generate 2.04 times more return on investment than Church Dwight. However, Acco Brands is 2.04 times more volatile than Church Dwight. It trades about 0.09 of its potential returns per unit of risk. Church Dwight is currently generating about 0.01 per unit of risk. If you would invest  524.00  in Acco Brands on September 16, 2024 and sell it today you would earn a total of  65.00  from holding Acco Brands or generate 12.4% return on investment over 90 days.

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

Acco Brands  vs.  Church Dwight

Acco Brands

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Acco Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

Church Dwight

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Church Dwight is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Acco Brands and Church Dwight

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

The idea behind Acco Brands and Church Dwight 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.