Correlation Between Federal Realty and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Federal Realty and Fortune Brands 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 Federal Realty and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Realty Investment and Fortune Brands Home, you can compare the effects of market volatilities on Federal Realty and Fortune Brands 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 Federal Realty with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and Fortune Brands.
Diversification Opportunities for Federal Realty and Fortune Brands
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Fortune is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and Federal Realty 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 Federal Realty Investment are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Federal Realty i.e., Federal Realty and Fortune Brands go up and down completely randomly.
Pair Corralation between Federal Realty and Fortune Brands
Assuming the 90 days trading horizon Federal Realty is expected to generate 2.9 times less return on investment than Fortune Brands. But when comparing it to its historical volatility, Federal Realty Investment is 1.56 times less risky than Fortune Brands. It trades about 0.03 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,125 in Fortune Brands Home on August 30, 2024 and sell it today you would earn a total of 2,704 from holding Fortune Brands Home or generate 52.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.25% |
| Values | Daily Returns |
Federal Realty Investment vs. Fortune Brands Home
Performance |
| Timeline |
| Federal Realty Investment |
| Fortune Brands Home |
Federal Realty and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Realty and Fortune Brands
The main advantage of trading using opposite Federal Realty and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| Federal Realty vs. Lendinvest PLC | Federal Realty vs. Neometals | Federal Realty vs. Albion Technology General | Federal Realty vs. Jupiter Fund Management |
| Fortune Brands vs. Lendinvest PLC | Fortune Brands vs. Neometals | Fortune Brands vs. Albion Technology General | Fortune Brands vs. Jupiter Fund Management |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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