Correlation Between Newell Brands and Clorox

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

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

Diversification Opportunities for Newell Brands and Clorox

0.32

Correlation Coefficient

Newell Brands  Clorox

Weak diversification

The 3 months correlation between Newell and Clorox is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Newell Brands and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox and Newell Brands 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 Newell Brands are associated (or correlated) with Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of Newell Brands i.e., Newell Brands and Clorox go up and down completely randomly.

Pair Corralation between Newell Brands and Clorox

Considering the 90-day investment horizon Newell Brands is expected to generate 2.93 times more return on investment than Clorox. However, Newell Brands is 2.93 times more volatile than The Clorox. It trades about 0.02 of its potential returns per unit of risk. The Clorox is currently generating about 0.04 per unit of risk. If you would invest  914.00  in Newell Brands on August 10, 2024 and sell it today you would lose (3.00) from holding Newell Brands or give up 0.33% of portfolio value over 90 days.

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

Newell Brands  vs.  The Clorox

Newell Brands

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newell Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Newell Brands disclosed solid returns over the last few months and may actually be approaching a breakup point.

Clorox

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Clorox are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Clorox showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newell Brands and Clorox

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

The idea behind Newell Brands and The Clorox 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.