Correlation Between Church Dwight and Stephan

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

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

Diversification Opportunities for Church Dwight and Stephan

0.73

Correlation Coefficient

Church Dwight  Stephan

Poor diversification

The 3 months correlation between Church and Stephan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and The Stephan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Stephan 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 Stephan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Stephan has no effect on the direction of Church Dwight i.e., Church Dwight and Stephan go up and down completely randomly.

Pair Corralation between Church Dwight and Stephan

If you would invest  10,494  in Church Dwight on September 16, 2024 and sell it today you would earn a total of  70.00  from holding Church Dwight or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Church Dwight  vs.  The Stephan Co

Church Dwight

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 1 (%) 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.

The Stephan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Stephan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Stephan is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Church Dwight and Stephan

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

The idea behind Church Dwight and The Stephan 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.