Correlation Between Analog Devices and Newell Brands

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

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

Diversification Opportunities for Analog Devices and Newell Brands

-0.51

Correlation Coefficient

Analog Devices  Newell Brands

Excellent diversification

The 3 months correlation between Analog and Newell is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands and Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Newell Brands go up and down completely randomly.

Pair Corralation between Analog Devices and Newell Brands

Considering the 90-day investment horizon Analog Devices is expected to generate 0.78 times more return on investment than Newell Brands. However, Analog Devices is 1.27 times less risky than Newell Brands. It trades about 0.09 of its potential returns per unit of risk. Newell Brands is currently generating about -0.49 per unit of risk. If you would invest  21,561  in Analog Devices on October 11, 2024 and sell it today you would earn a total of  483.00  from holding Analog Devices or generate 2.24% return on investment over 90 days.

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

Analog Devices  vs.  Newell Brands

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Newell Brands

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newell Brands are ranked lower than 10 (%) 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.

Pair Trading with Analog Devices and Newell Brands

The main advantage of trading using opposite Analog Devices and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices 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 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.