Correlation Between Church Dwight and CONSOLIDATED

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

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

Diversification Opportunities for Church Dwight and CONSOLIDATED

0.17

Correlation Coefficient

Church Dwight  CONSOLIDATED

Average diversification

The 3 months correlation between Church and CONSOLIDATED is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and CONSOLIDATED EDISON N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOLIDATED EDISON 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 CONSOLIDATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOLIDATED EDISON has no effect on the direction of Church Dwight i.e., Church Dwight and CONSOLIDATED go up and down completely randomly.

Pair Corralation between Church Dwight and CONSOLIDATED

Considering the 90-day investment horizon Church Dwight is expected to generate 3.04 times more return on investment than CONSOLIDATED. However, Church Dwight is 3.04 times more volatile than CONSOLIDATED EDISON N. It trades about 0.05 of its potential returns per unit of risk. CONSOLIDATED EDISON N is currently generating about -0.02 per unit of risk. If you would invest  10,886  in Church Dwight on December 5, 2024 and sell it today you would earn a total of  320.00  from holding Church Dwight or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	49.15%
Values	Daily Returns

Church Dwight  vs.  CONSOLIDATED EDISON N

Church Dwight

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 3 (%) 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.

CONSOLIDATED EDISON

Risk-Adjusted Performance

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSOLIDATED is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Church Dwight and CONSOLIDATED

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

The idea behind Church Dwight and CONSOLIDATED EDISON N 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.