Correlation Between Auto Trader and NEWELL RUBBERMAID

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

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

Diversification Opportunities for Auto Trader and NEWELL RUBBERMAID

-0.58

Correlation Coefficient

Auto Trader  NEWELL RUBBERMAID

Excellent diversification

The 3 months correlation between Auto and NEWELL is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and NEWELL RUBBERMAID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEWELL RUBBERMAID and Auto Trader 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 Auto Trader Group are associated (or correlated) with NEWELL RUBBERMAID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEWELL RUBBERMAID has no effect on the direction of Auto Trader i.e., Auto Trader and NEWELL RUBBERMAID go up and down completely randomly.

Pair Corralation between Auto Trader and NEWELL RUBBERMAID

Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the NEWELL RUBBERMAID. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 2.58 times less risky than NEWELL RUBBERMAID. The stock trades about -0.02 of its potential returns per unit of risk. The NEWELL RUBBERMAID is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  629.00  in NEWELL RUBBERMAID on September 3, 2024 and sell it today you would earn a total of  264.00  from holding NEWELL RUBBERMAID or generate 41.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Auto Trader Group  vs.  NEWELL RUBBERMAID

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

NEWELL RUBBERMAID

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEWELL RUBBERMAID are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, NEWELL RUBBERMAID unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Auto Trader and NEWELL RUBBERMAID

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

The idea behind Auto Trader Group and NEWELL RUBBERMAID 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.