Can any of the company-specific risk be diversified away by investing in both Church Dwight and J J 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 J J into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Church Dwight and J J Snack, you can compare the effects of market volatilities on Church Dwight and J J 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 J J. Check out your portfolio center. Please also check ongoing floating volatility patterns of Church Dwight and J J.
Diversification Opportunities for Church Dwight and J J
The 3 months correlation between Church and JJSF is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and J J Snack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J J Snack 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 J J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J J Snack has no effect on the direction of Church Dwight i.e., Church Dwight and J J go up and down completely randomly.
Considering the 90-day investment horizon Church Dwight is expected to generate 3.21 times less return on investment than J J. But when comparing it to its historical volatility, Church Dwight is 3.14 times less risky than J J. It trades about 0.15 of its potential returns per unit of risk. J J Snack is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 13,988 in J J Snack on March 5, 2024 and sell it today you would earn a total of 2,406 from holding J J Snack or generate 17.2% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Church Dwight is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Compared to the overall equity markets, risk-adjusted returns on investments in J J Snack are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, J J reported solid returns over the last few months and may actually be approaching a breakup point.