Correlation Between Fortune Brands and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on Fortune Brands and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Pentair PLC.
Diversification Opportunities for Fortune Brands and Pentair PLC
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fortune and Pentair is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Fortune Brands i.e., Fortune Brands and Pentair PLC go up and down completely randomly.
Pair Corralation between Fortune Brands and Pentair PLC
Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Pentair PLC. In addition to that, Fortune Brands is 1.49 times more volatile than Pentair PLC. It trades about -0.47 of its total potential returns per unit of risk. Pentair PLC is currently generating about -0.32 per unit of volatility. If you would invest 10,860 in Pentair PLC on September 24, 2024 and sell it today you would lose (772.00) from holding Pentair PLC or give up 7.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Fortune Brands Home vs. Pentair PLC
Performance |
| Timeline |
| Fortune Brands Home |
| Pentair PLC |
Fortune Brands and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and Pentair PLC
The main advantage of trading using opposite Fortune Brands and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| Fortune Brands vs. Sydbank | Fortune Brands vs. UNIQA Insurance Group | Fortune Brands vs. Bank of Ireland | Fortune Brands vs. Zoom Video Communications |
| Pentair PLC vs. Young Cos Brewery | Pentair PLC vs. Fortune Brands Home | Pentair PLC vs. DFS Furniture PLC | Pentair PLC vs. American Homes 4 |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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