Correlation Between Church Dwight and Deluxe

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

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

Diversification Opportunities for Church Dwight and Deluxe

0.7

Correlation Coefficient

Church Dwight  Deluxe

Poor diversification

The 3 months correlation between Church and Deluxe is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe 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 Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of Church Dwight i.e., Church Dwight and Deluxe go up and down completely randomly.

Pair Corralation between Church Dwight and Deluxe

Considering the 90-day investment horizon Church Dwight is expected to generate 0.83 times more return on investment than Deluxe. However, Church Dwight is 1.21 times less risky than Deluxe. It trades about -0.01 of its potential returns per unit of risk. Deluxe is currently generating about -0.12 per unit of risk. If you would invest  10,674  in Church Dwight on October 26, 2024 and sell it today you would lose (33.00) from holding Church Dwight or give up 0.31% of portfolio value over 90 days.

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

Church Dwight  vs.  Deluxe

Church Dwight

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 6 (%) 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.

Deluxe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Church Dwight and Deluxe

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

The idea behind Church Dwight and Deluxe 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.