Correlation Between Deluxe and Church Dwight

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

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

Diversification Opportunities for Deluxe and Church Dwight

0.7

Correlation Coefficient

Deluxe  Church Dwight

Poor diversification

The 3 months correlation between Deluxe and Church is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Church Dwight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight and Deluxe 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 Deluxe are associated (or correlated) with Church Dwight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Church Dwight has no effect on the direction of Deluxe i.e., Deluxe and Church Dwight go up and down completely randomly.

Pair Corralation between Deluxe and Church Dwight

Considering the 90-day investment horizon Deluxe is expected to under-perform the Church Dwight. In addition to that, Deluxe is 1.21 times more volatile than Church Dwight. It trades about -0.12 of its total potential returns per unit of risk. Church Dwight is currently generating about -0.01 per unit of volatility. If you would invest  10,674  in Church Dwight on October 26, 2024 and sell it today you would lose (33.00) from holding Church Dwight or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Deluxe  vs.  Church Dwight

Deluxe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Church Dwight

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 6 (%) 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.

Pair Trading with Deluxe and Church Dwight

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

The idea behind Deluxe and Church Dwight 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.