Correlation Between Newell Brands and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Newell Brands and Compass Diversified 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 Compass Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newell Brands and Compass Diversified Holdings, you can compare the effects of market volatilities on Newell Brands and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newell Brands and Compass Diversified.
Diversification Opportunities for Newell Brands and Compass Diversified
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Newell and Compass is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Newell Brands and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Newell Brands i.e., Newell Brands and Compass Diversified go up and down completely randomly.
Pair Corralation between Newell Brands and Compass Diversified
Considering the 90-day investment horizon Newell Brands is expected to generate 2.49 times more return on investment than Compass Diversified. However, Newell Brands is 2.49 times more volatile than Compass Diversified Holdings. It trades about 0.11 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about -0.17 per unit of risk. If you would invest 638.00 in Newell Brands on December 24, 2024 and sell it today you would earn a total of 35.00 from holding Newell Brands or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Newell Brands vs. Compass Diversified Holdings
Performance |
| Timeline |
| Newell Brands |
| Compass Diversified |
Newell Brands and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newell Brands and Compass Diversified
The main advantage of trading using opposite Newell Brands and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newell Brands position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| Newell Brands vs. The Clorox | Newell Brands vs. Colgate Palmolive | Newell Brands vs. Procter Gamble | Newell Brands vs. Unilever PLC ADR |
| Compass Diversified vs. Wizz Air Holdings | Compass Diversified vs. CF Industries Holdings | Compass Diversified vs. Grupo Aeroportuario del | Compass Diversified vs. AerSale Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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