Correlation Between KINDER and Church Dwight

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

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

Diversification Opportunities for KINDER and Church Dwight

0.09

Correlation Coefficient

KINDER  Church Dwight

Significant diversification

The 3 months correlation between KINDER and Church is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC and Church Dwight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight and KINDER 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 KINDER MORGAN INC 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 KINDER i.e., KINDER and Church Dwight go up and down completely randomly.

Pair Corralation between KINDER and Church Dwight

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to generate 1.66 times more return on investment than Church Dwight. However, KINDER is 1.66 times more volatile than Church Dwight. It trades about -0.04 of its potential returns per unit of risk. Church Dwight is currently generating about -0.16 per unit of risk. If you would invest  9,059  in KINDER MORGAN INC on October 12, 2024 and sell it today you would lose (124.00) from holding KINDER MORGAN INC or give up 1.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

KINDER MORGAN INC  vs.  Church Dwight

KINDER MORGAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Church Dwight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Church Dwight has generated negative risk-adjusted returns adding no value to investors with long positions. 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 KINDER and Church Dwight

The main advantage of trading using opposite KINDER and Church Dwight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINDER 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 KINDER MORGAN INC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.