Correlation Between Church Dwight and MEDIFAST INC

Can any of the company-specific risk be diversified away by investing in both Church Dwight and MEDIFAST INC 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 MEDIFAST INC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Church Dwight and MEDIFAST INC, you can compare the effects of market volatilities on Church Dwight and MEDIFAST INC 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 MEDIFAST INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Church Dwight and MEDIFAST INC.

Diversification Opportunities for Church Dwight and MEDIFAST INC

-0.74

Correlation Coefficient

Church Dwight  MEDIFAST INC

Pay attention - limited upside

The 3 months correlation between Church and MEDIFAST is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Church Dwight and MEDIFAST INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIFAST INC 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 MEDIFAST INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIFAST INC has no effect on the direction of Church Dwight i.e., Church Dwight and MEDIFAST INC go up and down completely randomly.

Pair Corralation between Church Dwight and MEDIFAST INC

Considering the 90-day investment horizon Church Dwight is expected to generate 0.18 times more return on investment than MEDIFAST INC. However, Church Dwight is 5.62 times less risky than MEDIFAST INC. It trades about 0.14 of its potential returns per unit of risk. MEDIFAST INC is currently generating about -0.23 per unit of risk. If you would invest  9,908  in Church Dwight on February 2, 2024 and sell it today you would earn a total of  680.00  from holding Church Dwight or generate 6.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Church Dwight  vs.  MEDIFAST INC

Church Dwight

Risk-Adjusted Performance

10 of 100

Good

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 unfluctuating technical indicators, Church Dwight may actually be approaching a critical reversion point that can send shares even higher in June 2024.

MEDIFAST INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MEDIFAST INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Church Dwight and MEDIFAST INC

The main advantage of trading using opposite Church Dwight and MEDIFAST INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Church Dwight position performs unexpectedly, MEDIFAST INC 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 MEDIFAST INC will offset losses from the drop in MEDIFAST INC's long position.

The idea behind Church Dwight and MEDIFAST INC 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.