Correlation Between Church Dwight and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Church Dwight and Procter Gamble 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 Church Dwight and Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Church Dwight and Procter Gamble, you can compare the effects of market volatilities on Church Dwight and Procter Gamble 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 Church Dwight with a short position of Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Church Dwight and Procter Gamble.
Diversification Opportunities for Church Dwight and Procter Gamble
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Church and Procter is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble and Church Dwight 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 Church Dwight are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Church Dwight i.e., Church Dwight and Procter Gamble go up and down completely randomly.
Pair Corralation between Church Dwight and Procter Gamble
Considering the 90-day investment horizon Church Dwight is expected to generate 1.11 times more return on investment than Procter Gamble. However, Church Dwight is 1.11 times more volatile than Procter Gamble. It trades about -0.11 of its potential returns per unit of risk. Procter Gamble is currently generating about -0.22 per unit of risk. If you would invest 10,426 in Church Dwight on January 16, 2024 and sell it today you would lose (220.00) from holding Church Dwight or give up 2.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Church Dwight vs. Procter Gamble
Performance |
| Timeline |
| Church Dwight |
| Procter Gamble |
Church Dwight and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Church Dwight and Procter Gamble
The main advantage of trading using opposite Church Dwight and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Church Dwight position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.| Church Dwight vs. Unilever PLC ADR | Church Dwight vs. Estee Lauder Companies | Church Dwight vs. ELF Beauty | Church Dwight vs. Coty Inc |
| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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