Correlation Between Fortune Brands and GoldMining
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and GoldMining 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 GoldMining 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 GoldMining, you can compare the effects of market volatilities on Fortune Brands and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and GoldMining.
Diversification Opportunities for Fortune Brands and GoldMining
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fortune and GoldMining is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Fortune Brands i.e., Fortune Brands and GoldMining go up and down completely randomly.
Pair Corralation between Fortune Brands and GoldMining
Assuming the 90 days trading horizon Fortune Brands Home is expected to generate 0.75 times more return on investment than GoldMining. However, Fortune Brands Home is 1.34 times less risky than GoldMining. It trades about 0.05 of its potential returns per unit of risk. GoldMining is currently generating about -0.14 per unit of risk. If you would invest 7,653 in Fortune Brands Home on September 13, 2024 and sell it today you would earn a total of 130.00 from holding Fortune Brands Home or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 66.67% |
| Values | Daily Returns |
Fortune Brands Home vs. GoldMining
Performance |
| Timeline |
| Fortune Brands Home |
| GoldMining |
Fortune Brands and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and GoldMining
The main advantage of trading using opposite Fortune Brands and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.| Fortune Brands vs. STMicroelectronics NV | Fortune Brands vs. Aeorema Communications Plc | Fortune Brands vs. Charter Communications Cl | Fortune Brands vs. Air Products Chemicals |
| GoldMining vs. Jacquet Metal Service | GoldMining vs. Wheaton Precious Metals | GoldMining vs. Adriatic Metals | GoldMining vs. Telecom Italia SpA |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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