Correlation Between Newell Brands and Honest
Can any of the company-specific risk be diversified away by investing in both Newell Brands and Honest 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 Honest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newell Brands and Honest Company, you can compare the effects of market volatilities on Newell Brands and Honest 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 Honest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newell Brands and Honest.
Diversification Opportunities for Newell Brands and Honest
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Newell and Honest is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Newell Brands and Honest Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honest Company 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 Honest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honest Company has no effect on the direction of Newell Brands i.e., Newell Brands and Honest go up and down completely randomly.
Pair Corralation between Newell Brands and Honest
Considering the 90-day investment horizon Newell Brands is expected to generate 1.07 times less return on investment than Honest. But when comparing it to its historical volatility, Newell Brands is 1.24 times less risky than Honest. It trades about 0.12 of its potential returns per unit of risk. Honest Company is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 430.00 in Honest Company on November 2, 2024 and sell it today you would earn a total of 198.00 from holding Honest Company or generate 46.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newell Brands vs. Honest Company
Performance |
| Timeline |
| Newell Brands |
| Honest Company |
Newell Brands and Honest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newell Brands and Honest
The main advantage of trading using opposite Newell Brands and Honest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newell Brands position performs unexpectedly, Honest 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 Honest will offset losses from the drop in Honest's long position.| Newell Brands vs. The Clorox | Newell Brands vs. Colgate Palmolive | Newell Brands vs. Procter Gamble | Newell Brands vs. Unilever PLC ADR |
| Honest vs. Estee Lauder Companies | Honest vs. Hims Hers Health | Honest vs. Procter Gamble | Honest vs. Coty Inc |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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