Correlation Between Church Dwight and CTS

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

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

Diversification Opportunities for Church Dwight and CTS

0.64

Correlation Coefficient

Church Dwight  CTS

Poor diversification

The 3 months correlation between Church and CTS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation and Church Dwight 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 Church Dwight are associated (or correlated) with CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of Church Dwight i.e., Church Dwight and CTS go up and down completely randomly.

Pair Corralation between Church Dwight and CTS

Considering the 90-day investment horizon Church Dwight is expected to generate 1.97 times less return on investment than CTS. But when comparing it to its historical volatility, Church Dwight is 1.94 times less risky than CTS. It trades about 0.04 of its potential returns per unit of risk. CTS Corporation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,661  in CTS Corporation on October 7, 2024 and sell it today you would earn a total of  587.00  from holding CTS Corporation or generate 12.59% return on investment over 90 days.

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

Church Dwight  vs.  CTS Corp.

Church Dwight

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 7 (%) 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.

CTS Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Church Dwight and CTS

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

The idea behind Church Dwight and CTS Corporation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.