Correlation Between Church Dwight and Sonos

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

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

Diversification Opportunities for Church Dwight and Sonos

0.47

Correlation Coefficient

Church Dwight  Sonos

Very weak diversification

The 3 months correlation between Church and Sonos is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc 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 Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of Church Dwight i.e., Church Dwight and Sonos go up and down completely randomly.

Pair Corralation between Church Dwight and Sonos

Considering the 90-day investment horizon Church Dwight is expected to generate 0.44 times more return on investment than Sonos. However, Church Dwight is 2.26 times less risky than Sonos. It trades about 0.04 of its potential returns per unit of risk. Sonos Inc is currently generating about -0.03 per unit of risk. If you would invest  9,750  in Church Dwight on October 7, 2024 and sell it today you would earn a total of  714.00  from holding Church Dwight or generate 7.32% return on investment over 90 days.

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

Church Dwight  vs.  Sonos Inc

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.

Sonos Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Church Dwight and Sonos

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

The idea behind Church Dwight and Sonos Inc 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.