Correlation Between Church Dwight and Travelers Companies

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Can any of the company-specific risk be diversified away by investing in both Church Dwight and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Church Dwight and The Travelers Companies, you can compare the effects of market volatilities on Church Dwight and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Church Dwight and Travelers Companies.

Diversification Opportunities for Church Dwight and Travelers Companies

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Church and Travelers is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Church Dwight i.e., Church Dwight and Travelers Companies go up and down completely randomly.

Pair Corralation between Church Dwight and Travelers Companies

Considering the 90-day investment horizon Church Dwight is expected to generate 60.37 times less return on investment than Travelers Companies. But when comparing it to its historical volatility, Church Dwight is 1.12 times less risky than Travelers Companies. It trades about 0.0 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,598  in The Travelers Companies on May 19, 2022 and sell it today you would earn a total of  6,754  from holding The Travelers Companies or generate 63.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.79%
ValuesDaily Returns

Church Dwight  vs.  The Travelers Companies

 Performance (%) 
       Timeline  
Church Dwight 
Church Performance
0 of 100
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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Church Price Channel

The Travelers Companies 
Travelers Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Travelers Price Channel

Church Dwight and Travelers Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Church Dwight and Travelers Companies

The main advantage of trading using opposite Church Dwight and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Church Dwight position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.
The idea behind Church Dwight and The Travelers Companies 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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