Correlation Between ELF Beauty and Newell Brands

Can any of the company-specific risk be diversified away by investing in both ELF Beauty and Newell Brands 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 ELF Beauty and Newell Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ELF Beauty and Newell Brands, you can compare the effects of market volatilities on ELF Beauty and Newell Brands 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 ELF Beauty with a short position of Newell Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELF Beauty and Newell Brands.

Diversification Opportunities for ELF Beauty and Newell Brands

0.35

Correlation Coefficient

ELF Beauty  Newell Brands

Weak diversification

The 3 months correlation between ELF and Newell is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ELF Beauty and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands and ELF Beauty 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 ELF Beauty are associated (or correlated) with Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of ELF Beauty i.e., ELF Beauty and Newell Brands go up and down completely randomly.

Pair Corralation between ELF Beauty and Newell Brands

Considering the 90-day investment horizon ELF Beauty is expected to generate 1.0 times more return on investment than Newell Brands. However, ELF Beauty is 1.0 times more volatile than Newell Brands. It trades about 0.23 of its potential returns per unit of risk. Newell Brands is currently generating about 0.01 per unit of risk. If you would invest  6,769  in ELF Beauty on May 6, 2025 and sell it today you would earn a total of  4,873  from holding ELF Beauty or generate 71.99% return on investment over 90 days.

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

ELF Beauty  vs.  Newell Brands

ELF Beauty

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ELF Beauty are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, ELF Beauty reported solid returns over the last few months and may actually be approaching a breakup point.

Newell Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newell Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newell Brands is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ELF Beauty and Newell Brands

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

The idea behind ELF Beauty and Newell Brands 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.