Correlation Between Church Dwight and Unicharm

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

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

Diversification Opportunities for Church Dwight and Unicharm

-0.52

Correlation Coefficient

Church Dwight  Unicharm

Excellent diversification

The 3 months correlation between Church and Unicharm is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Unicharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unicharm 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 Unicharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unicharm has no effect on the direction of Church Dwight i.e., Church Dwight and Unicharm go up and down completely randomly.

Pair Corralation between Church Dwight and Unicharm

Considering the 90-day investment horizon Church Dwight is expected to generate 121.77 times less return on investment than Unicharm. But when comparing it to its historical volatility, Church Dwight is 36.13 times less risky than Unicharm. It trades about 0.03 of its potential returns per unit of risk. Unicharm is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,075  in Unicharm on October 22, 2024 and sell it today you would lose (290.00) from holding Unicharm or give up 26.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.68%
Values	Daily Returns

Church Dwight  vs.  Unicharm

Church Dwight

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 4 (%) 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.

Unicharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unicharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Church Dwight and Unicharm

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

The idea behind Church Dwight and Unicharm 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.