Correlation Between NEWELL RUBBERMAID and CECO ENVIRONMENTAL

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

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

Diversification Opportunities for NEWELL RUBBERMAID and CECO ENVIRONMENTAL

0.68

Correlation Coefficient

NEWELL RUBBERMAID  CECO ENVIRONMENTAL

Poor diversification

The 3 months correlation between NEWELL and CECO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NEWELL RUBBERMAID and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and NEWELL RUBBERMAID 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 NEWELL RUBBERMAID are associated (or correlated) with CECO ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO ENVIRONMENTAL has no effect on the direction of NEWELL RUBBERMAID i.e., NEWELL RUBBERMAID and CECO ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between NEWELL RUBBERMAID and CECO ENVIRONMENTAL

Assuming the 90 days trading horizon NEWELL RUBBERMAID is expected to generate 1.21 times more return on investment than CECO ENVIRONMENTAL. However, NEWELL RUBBERMAID is 1.21 times more volatile than CECO ENVIRONMENTAL. It trades about 0.08 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about 0.02 per unit of risk. If you would invest  931.00  in NEWELL RUBBERMAID on October 7, 2024 and sell it today you would earn a total of  34.00  from holding NEWELL RUBBERMAID or generate 3.65% return on investment over 90 days.

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

NEWELL RUBBERMAID   vs.  CECO ENVIRONMENTAL

NEWELL RUBBERMAID

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEWELL RUBBERMAID are ranked lower than 13 (%) 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.

CECO ENVIRONMENTAL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEWELL RUBBERMAID and CECO ENVIRONMENTAL

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

The idea behind NEWELL RUBBERMAID and CECO ENVIRONMENTAL 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.