Correlation Between Kenvue and Clorox

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

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

Diversification Opportunities for Kenvue and Clorox

0.56

Correlation Coefficient

Kenvue  Clorox

Very weak diversification

The 3 months correlation between Kenvue and Clorox is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kenvue Inc and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox and Kenvue 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 Kenvue Inc are associated (or correlated) with Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of Kenvue i.e., Kenvue and Clorox go up and down completely randomly.

Pair Corralation between Kenvue and Clorox

Given the investment horizon of 90 days Kenvue Inc is expected to generate 0.98 times more return on investment than Clorox. However, Kenvue Inc is 1.02 times less risky than Clorox. It trades about -0.02 of its potential returns per unit of risk. The Clorox is currently generating about -0.07 per unit of risk. If you would invest  2,384  in Kenvue Inc on November 28, 2024 and sell it today you would lose (47.00) from holding Kenvue Inc or give up 1.97% of portfolio value over 90 days.

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

Kenvue Inc  vs.  The Clorox

Kenvue Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kenvue Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kenvue is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Clorox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Clorox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kenvue and Clorox

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

The idea behind Kenvue Inc and The Clorox 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.