Correlation Between Timken and Edgewell Personal

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

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

Diversification Opportunities for Timken and Edgewell Personal

-0.52

Correlation Coefficient

Timken  Edgewell Personal

Excellent diversification

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

Pair Corralation between Timken and Edgewell Personal

Considering the 90-day investment horizon Timken Company is expected to generate 0.89 times more return on investment than Edgewell Personal. However, Timken Company is 1.12 times less risky than Edgewell Personal. It trades about 0.06 of its potential returns per unit of risk. Edgewell Personal Care is currently generating about -0.1 per unit of risk. If you would invest  7,133  in Timken Company on December 20, 2024 and sell it today you would earn a total of  411.00  from holding Timken Company or generate 5.76% return on investment over 90 days.

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

Timken Company  vs.  Edgewell Personal Care

Timken Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, Timken may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Edgewell Personal Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Timken and Edgewell Personal

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

The idea behind Timken Company and Edgewell Personal Care 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.