Correlation Between Fortune Brands and ONEOK
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and ONEOK 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 Fortune Brands and ONEOK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Brands Home and ONEOK Inc, you can compare the effects of market volatilities on Fortune Brands and ONEOK 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 Fortune Brands with a short position of ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and ONEOK.
Diversification Opportunities for Fortune Brands and ONEOK
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fortune and ONEOK is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc and Fortune 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 Fortune Brands Home are associated (or correlated) with ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Fortune Brands i.e., Fortune Brands and ONEOK go up and down completely randomly.
Pair Corralation between Fortune Brands and ONEOK
Assuming the 90 days trading horizon Fortune Brands is expected to generate 1.84 times less return on investment than ONEOK. In addition to that, Fortune Brands is 1.41 times more volatile than ONEOK Inc. It trades about 0.03 of its total potential returns per unit of risk. ONEOK Inc is currently generating about 0.08 per unit of volatility. If you would invest 5,747 in ONEOK Inc on September 23, 2024 and sell it today you would earn a total of 4,238 from holding ONEOK Inc or generate 73.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 78.02% |
| Values | Daily Returns |
Fortune Brands Home vs. ONEOK Inc
Performance |
| Timeline |
| Fortune Brands Home |
| ONEOK Inc |
Fortune Brands and ONEOK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and ONEOK
The main advantage of trading using opposite Fortune Brands and ONEOK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, ONEOK 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 ONEOK will offset losses from the drop in ONEOK's long position.| Fortune Brands vs. Uniper SE | Fortune Brands vs. Mulberry Group PLC | Fortune Brands vs. London Security Plc | Fortune Brands vs. Triad Group PLC |
| ONEOK vs. Uniper SE | ONEOK vs. Mulberry Group PLC | ONEOK vs. London Security Plc | ONEOK vs. Triad Group PLC |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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