Correlation Between Church Dwight and Soho House

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

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

Diversification Opportunities for Church Dwight and Soho House

-0.53

Correlation Coefficient

Church Dwight  Soho House

Excellent diversification

The 3 months correlation between Church and Soho is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House 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 Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of Church Dwight i.e., Church Dwight and Soho House go up and down completely randomly.

Pair Corralation between Church Dwight and Soho House

Considering the 90-day investment horizon Church Dwight is expected to generate 0.34 times more return on investment than Soho House. However, Church Dwight is 2.93 times less risky than Soho House. It trades about -0.01 of its potential returns per unit of risk. Soho House Co is currently generating about -0.03 per unit of risk. If you would invest  10,645  in Church Dwight on December 26, 2024 and sell it today you would lose (172.00) from holding Church Dwight or give up 1.62% of portfolio value over 90 days.

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

Church Dwight  vs.  Soho House Co

Church Dwight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Church Dwight has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Soho House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Soho House Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Church Dwight and Soho House

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

The idea behind Church Dwight and Soho House 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.