Correlation Between Dover and Churchill Capital

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

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

Diversification Opportunities for Dover and Churchill Capital

0.34

Correlation Coefficient

Dover  Churchill Capital

Weak diversification

The 3 months correlation between Dover and Churchill is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dover and Churchill Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Capital Corp and Dover 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 Dover are associated (or correlated) with Churchill Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Churchill Capital Corp has no effect on the direction of Dover i.e., Dover and Churchill Capital go up and down completely randomly.

Pair Corralation between Dover and Churchill Capital

Considering the 90-day investment horizon Dover is expected to under-perform the Churchill Capital. In addition to that, Dover is 10.22 times more volatile than Churchill Capital Corp. It trades about -0.05 of its total potential returns per unit of risk. Churchill Capital Corp is currently generating about 0.15 per unit of volatility. If you would invest  1,073  in Churchill Capital Corp on March 22, 2024 and sell it today you would earn a total of  4.00  from holding Churchill Capital Corp or generate 0.37% return on investment over 90 days.

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

Dover  vs.  Churchill Capital Corp

Dover

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dover is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Churchill Capital Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Capital Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Churchill Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dover and Churchill Capital

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

The idea behind Dover and Churchill Capital Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.