Correlation Between Church Dwight and NORFOLK

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

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

Diversification Opportunities for Church Dwight and NORFOLK

-0.01

Correlation Coefficient

Church Dwight  NORFOLK

Good diversification

The 3 months correlation between Church and NORFOLK is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Church Dwight i.e., Church Dwight and NORFOLK go up and down completely randomly.

Pair Corralation between Church Dwight and NORFOLK

Considering the 90-day investment horizon Church Dwight is expected to under-perform the NORFOLK. In addition to that, Church Dwight is 2.6 times more volatile than NORFOLK SOUTHN P. It trades about -0.23 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.21 per unit of volatility. If you would invest  9,770  in NORFOLK SOUTHN P on September 30, 2024 and sell it today you would lose (121.00) from holding NORFOLK SOUTHN P or give up 1.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Church Dwight  vs.  NORFOLK SOUTHN P

Church Dwight

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 2 (%) 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.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Church Dwight and NORFOLK

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

The idea behind Church Dwight and NORFOLK SOUTHN P 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.