Correlation Between VARIOUS EATERIES and NEWELL RUBBERMAID

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

By analyzing existing cross correlation between VARIOUS EATERIES LS and NEWELL RUBBERMAID , you can compare the effects of market volatilities on VARIOUS EATERIES and NEWELL RUBBERMAID 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 VARIOUS EATERIES with a short position of NEWELL RUBBERMAID. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and NEWELL RUBBERMAID.

Diversification Opportunities for VARIOUS EATERIES and NEWELL RUBBERMAID

-0.41

Correlation Coefficient

VARIOUS EATERIES  NEWELL RUBBERMAID

Very good diversification

The 3 months correlation between VARIOUS and NEWELL is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and NEWELL RUBBERMAID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEWELL RUBBERMAID and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with NEWELL RUBBERMAID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEWELL RUBBERMAID has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and NEWELL RUBBERMAID go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and NEWELL RUBBERMAID

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the NEWELL RUBBERMAID. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 1.51 times less risky than NEWELL RUBBERMAID. The stock trades about -0.04 of its potential returns per unit of risk. The NEWELL RUBBERMAID is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,128  in NEWELL RUBBERMAID on September 19, 2024 and sell it today you would lose (135.00) from holding NEWELL RUBBERMAID or give up 11.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

VARIOUS EATERIES LS  vs.  NEWELL RUBBERMAID

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NEWELL RUBBERMAID

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEWELL RUBBERMAID are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, NEWELL RUBBERMAID unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and NEWELL RUBBERMAID

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

The idea behind VARIOUS EATERIES LS and NEWELL RUBBERMAID 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.