Correlation Between FinVolution and Newell Brands

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

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

Diversification Opportunities for FinVolution and Newell Brands

0.58

Correlation Coefficient

FinVolution  Newell Brands

Very weak diversification

The 3 months correlation between FinVolution and Newell is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands and FinVolution 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 FinVolution Group 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 FinVolution i.e., FinVolution and Newell Brands go up and down completely randomly.

Pair Corralation between FinVolution and Newell Brands

Given the investment horizon of 90 days FinVolution is expected to generate 2.11 times less return on investment than Newell Brands. But when comparing it to its historical volatility, FinVolution Group is 1.69 times less risky than Newell Brands. It trades about 0.13 of its potential returns per unit of risk. Newell Brands is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,019  in Newell Brands on October 6, 2024 and sell it today you would earn a total of  1,086  from holding Newell Brands or generate 21.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.12%
Values	Daily Returns

FinVolution Group  vs.  Newell Brands

FinVolution Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FinVolution is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated 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 FinVolution and Newell Brands

The main advantage of trading using opposite FinVolution and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FinVolution 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 FinVolution Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.