Correlation Between Church Dwight and Weyco

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

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

Diversification Opportunities for Church Dwight and Weyco

0.52

Correlation Coefficient

Church Dwight  Weyco

Very weak diversification

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

Pair Corralation between Church Dwight and Weyco

Considering the 90-day investment horizon Church Dwight is expected to under-perform the Weyco. But the stock apears to be less risky and, when comparing its historical volatility, Church Dwight is 2.88 times less risky than Weyco. The stock trades about -0.3 of its potential returns per unit of risk. The Weyco Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,528  in Weyco Group on September 21, 2024 and sell it today you would earn a total of  199.00  from holding Weyco Group or generate 5.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Church Dwight  vs.  Weyco Group

Church Dwight

Risk-Adjusted Performance

3 of 100

Insignificant

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Weyco Group

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Church Dwight and Weyco

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

The idea behind Church Dwight and Weyco Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.