Correlation Between Henkel Ag and Church Dwight
Can any of the company-specific risk be diversified away by investing in both Henkel Ag 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 Henkel Ag and Church Dwight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henkel Ag A and Church Dwight, you can compare the effects of market volatilities on Henkel Ag 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 Henkel Ag with a short position of Church Dwight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henkel Ag and Church Dwight.
Diversification Opportunities for Henkel Ag and Church Dwight
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Henkel and Church is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Henkel Ag A and Church Dwight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight and Henkel Ag 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 Henkel Ag A 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 Henkel Ag i.e., Henkel Ag and Church Dwight go up and down completely randomly.
Pair Corralation between Henkel Ag and Church Dwight
Assuming the 90 days horizon Henkel Ag is expected to generate 2.03 times less return on investment than Church Dwight. In addition to that, Henkel Ag is 1.03 times more volatile than Church Dwight. It trades about 0.02 of its total potential returns per unit of risk. Church Dwight is currently generating about 0.05 per unit of volatility. If you would invest 9,261 in Church Dwight on September 4, 2024 and sell it today you would earn a total of 1,863 from holding Church Dwight or generate 20.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Henkel Ag A vs. Church Dwight
Performance |
| Timeline |
| Henkel Ag A |
| Church Dwight |
Henkel Ag and Church Dwight Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Henkel Ag and Church Dwight
The main advantage of trading using opposite Henkel Ag and Church Dwight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henkel Ag 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.| Henkel Ag vs. Beiersdorf Aktiengesellschaft | Henkel Ag vs. Essity AB | Henkel Ag vs. Hengan International Group | Henkel Ag vs. LOral SA |
| Church Dwight vs. The Clorox | Church Dwight vs. Colgate Palmolive | Church Dwight vs. Unilever PLC ADR | Church Dwight vs. Kimberly Clark |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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