Correlation Between Church Dwight and Henkel AG

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

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

Diversification Opportunities for Church Dwight and Henkel AG

-0.78

Correlation Coefficient

Church Dwight  Henkel AG

Pay attention - limited upside

The 3 months correlation between Church and Henkel is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG 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 Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Church Dwight i.e., Church Dwight and Henkel AG go up and down completely randomly.

Pair Corralation between Church Dwight and Henkel AG

Considering the 90-day investment horizon Church Dwight is expected to generate 0.67 times more return on investment than Henkel AG. However, Church Dwight is 1.48 times less risky than Henkel AG. It trades about 0.03 of its potential returns per unit of risk. Henkel AG Co is currently generating about -0.01 per unit of risk. If you would invest  10,355  in Church Dwight on September 17, 2024 and sell it today you would earn a total of  209.00  from holding Church Dwight or generate 2.02% return on investment over 90 days.

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

Church Dwight  vs.  Henkel AG Co

Church Dwight

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 2 (%) 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.

Henkel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henkel AG Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Henkel AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Church Dwight and Henkel AG

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

The idea behind Church Dwight and Henkel AG Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.