Correlation Between International Business and CHURCH

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

By analyzing existing cross correlation between International Business Machines and CHURCH DWIGHT INC, you can compare the effects of market volatilities on International Business and CHURCH 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 International Business with a short position of CHURCH. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and CHURCH.

Diversification Opportunities for International Business and CHURCH

-0.77

Correlation Coefficient

International Business  CHURCH

Pay attention - limited upside

The 3 months correlation between International and CHURCH is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and CHURCH DWIGHT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHURCH DWIGHT INC and International Business 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 International Business Machines are associated (or correlated) with CHURCH. 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 INC has no effect on the direction of International Business i.e., International Business and CHURCH go up and down completely randomly.

Pair Corralation between International Business and CHURCH

Considering the 90-day investment horizon International Business is expected to generate 1.52 times less return on investment than CHURCH. In addition to that, International Business is 1.66 times more volatile than CHURCH DWIGHT INC. It trades about 0.09 of its total potential returns per unit of risk. CHURCH DWIGHT INC is currently generating about 0.23 per unit of volatility. If you would invest  7,709  in CHURCH DWIGHT INC on December 25, 2024 and sell it today you would earn a total of  528.00  from holding CHURCH DWIGHT INC or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	37.29%
Values	Daily Returns

International Business Machine  vs.  CHURCH DWIGHT INC

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

CHURCH DWIGHT INC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CHURCH DWIGHT INC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, CHURCH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and CHURCH

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

The idea behind International Business Machines and CHURCH DWIGHT INC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.