Correlation Between Church Dwight and Smurfit WestRock

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

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

Diversification Opportunities for Church Dwight and Smurfit WestRock

0.48

Correlation Coefficient

Church Dwight  Smurfit WestRock

Very weak diversification

The 3 months correlation between Church and Smurfit is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Smurfit WestRock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit WestRock plc 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 Smurfit WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit WestRock plc has no effect on the direction of Church Dwight i.e., Church Dwight and Smurfit WestRock go up and down completely randomly.

Pair Corralation between Church Dwight and Smurfit WestRock

Considering the 90-day investment horizon Church Dwight is expected to generate 0.54 times more return on investment than Smurfit WestRock. However, Church Dwight is 1.85 times less risky than Smurfit WestRock. It trades about 0.15 of its potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.02 per unit of risk. If you would invest  10,683  in Church Dwight on December 1, 2024 and sell it today you would earn a total of  437.00  from holding Church Dwight or generate 4.09% 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.  Smurfit WestRock plc

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.

Smurfit WestRock plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit WestRock plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Smurfit WestRock is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Church Dwight and Smurfit WestRock

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

The idea behind Church Dwight and Smurfit WestRock plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.