Correlation Between Clorox and Church Dwight

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

Diversification Opportunities for Clorox and Church Dwight

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Clorox and Church is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Clorox Company and Church Dwight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight and Clorox 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 Clorox Company 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 Clorox i.e., Clorox and Church Dwight go up and down completely randomly.

Pair Corralation between Clorox and Church Dwight

Considering the 90-day investment horizon Clorox Company is expected to generate 0.84 times more return on investment than Church Dwight. However, Clorox Company is 1.19 times less risky than Church Dwight. It trades about 0.0 of its potential returns per unit of risk. Church Dwight is currently generating about -0.29 per unit of risk. If you would invest  14,228  in Clorox Company on June 27, 2022 and sell it today you would lose (70.00)  from holding Clorox Company or give up 0.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Clorox Company  vs.  Church Dwight

 Performance (%) 
       Timeline  
Clorox Company 
Clorox Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Clorox Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Clorox is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Clorox Price Channel

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 sluggish performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Church Price Channel

Clorox and Church Dwight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clorox and Church Dwight

The main advantage of trading using opposite Clorox and Church Dwight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clorox 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.
Clorox vs. Sigma Lithium Corp
The idea behind Clorox Company 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.
Church Dwight vs. Sigma Lithium Corp
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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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