Correlation Between Este Lauder and Newell Brands

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

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

Diversification Opportunities for Este Lauder and Newell Brands

-0.28

Correlation Coefficient

Este Lauder  Newell Brands

Very good diversification

The 3 months correlation between Este and Newell is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands and Este Lauder 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 The Este Lauder 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 Este Lauder i.e., Este Lauder and Newell Brands go up and down completely randomly.

Pair Corralation between Este Lauder and Newell Brands

Assuming the 90 days trading horizon The Este Lauder is expected to under-perform the Newell Brands. But the stock apears to be less risky and, when comparing its historical volatility, The Este Lauder is 1.11 times less risky than Newell Brands. The stock trades about -0.06 of its potential returns per unit of risk. The Newell Brands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,203  in Newell Brands on October 14, 2024 and sell it today you would lose (1,098) from holding Newell Brands or give up 15.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

The Este Lauder  vs.  Newell Brands

Este Lauder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Newell Brands

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newell Brands are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Newell Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Este Lauder and Newell Brands

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

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.