Correlation Between Honest and Newell Brands

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

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

Diversification Opportunities for Honest and Newell Brands

0.8

Correlation Coefficient

Honest  Newell Brands

Very poor diversification

The 3 months correlation between Honest and Newell is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands and Honest 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 Honest Company 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 Honest i.e., Honest and Newell Brands go up and down completely randomly.

Pair Corralation between Honest and Newell Brands

Given the investment horizon of 90 days Honest Company is expected to generate 0.89 times more return on investment than Newell Brands. However, Honest Company is 1.13 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 -0.15 per unit of risk. If you would invest  690.00  in Honest Company on December 29, 2024 and sell it today you would lose (192.00) from holding Honest Company or give up 27.83% of portfolio value over 90 days.

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

Honest Company  vs.  Newell Brands

Honest Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honest Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Newell Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newell Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Honest and Newell Brands

The main advantage of trading using opposite Honest and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest 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 Honest Company 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.