Correlation Between Newell Brands and Relief Therapeutics

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

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

Diversification Opportunities for Newell Brands and Relief Therapeutics

0.39

Correlation Coefficient

Newell Brands  Relief Therapeutics

Weak diversification

The 3 months correlation between Newell and Relief is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Newell Brands and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics and Newell Brands 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 Brands are associated (or correlated) with Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of Newell Brands i.e., Newell Brands and Relief Therapeutics go up and down completely randomly.

Pair Corralation between Newell Brands and Relief Therapeutics

Considering the 90-day investment horizon Newell Brands is expected to generate 0.93 times more return on investment than Relief Therapeutics. However, Newell Brands is 1.08 times less risky than Relief Therapeutics. It trades about -0.15 of its potential returns per unit of risk. Relief Therapeutics Holding is currently generating about -0.16 per unit of risk. If you would invest  980.00  in Newell Brands on December 19, 2024 and sell it today you would lose (329.00) from holding Newell Brands or give up 33.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Newell Brands  vs.  Relief Therapeutics Holding

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.

Relief Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Relief Therapeutics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Newell Brands and Relief Therapeutics

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

The idea behind Newell Brands and Relief Therapeutics Holding 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.