Correlation Between Church Dwight and Big Tree

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

Diversification Opportunities for Church Dwight and Big Tree

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Church and Big is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud 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 Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of Church Dwight i.e., Church Dwight and Big Tree go up and down completely randomly.

Pair Corralation between Church Dwight and Big Tree

Considering the 90-day investment horizon Church Dwight is expected to generate 5.16 times less return on investment than Big Tree. But when comparing it to its historical volatility, Church Dwight is 15.43 times less risky than Big Tree. It trades about 0.07 of its potential returns per unit of risk. Big Tree Cloud is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,071  in Big Tree Cloud on August 27, 2024 and sell it today you would lose (842.00) from holding Big Tree Cloud or give up 78.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Church Dwight  vs.  Big Tree Cloud

 Performance 
       Timeline  
Church Dwight 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Church Dwight may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Big Tree Cloud 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Big Tree Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Big Tree is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Church Dwight and Big Tree Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Church Dwight and Big Tree

The main advantage of trading using opposite Church Dwight and Big Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Church Dwight position performs unexpectedly, Big Tree 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 Big Tree will offset losses from the drop in Big Tree's long position.
The idea behind Church Dwight and Big Tree Cloud 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 the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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