Correlation Between Fortune Brands and Aberdeen Diversified
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Aberdeen Diversified 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 Aberdeen Diversified 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 Aberdeen Diversified Income, you can compare the effects of market volatilities on Fortune Brands and Aberdeen Diversified 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 Aberdeen Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Aberdeen Diversified.
Diversification Opportunities for Fortune Brands and Aberdeen Diversified
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fortune and Aberdeen is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Aberdeen Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Diversified 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 Aberdeen Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Diversified has no effect on the direction of Fortune Brands i.e., Fortune Brands and Aberdeen Diversified go up and down completely randomly.
Pair Corralation between Fortune Brands and Aberdeen Diversified
Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Aberdeen Diversified. In addition to that, Fortune Brands is 2.45 times more volatile than Aberdeen Diversified Income. It trades about -0.4 of its total potential returns per unit of risk. Aberdeen Diversified Income is currently generating about 0.25 per unit of volatility. If you would invest 4,300 in Aberdeen Diversified Income on October 11, 2024 and sell it today you would earn a total of 160.00 from holding Aberdeen Diversified Income or generate 3.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.0% |
| Values | Daily Returns |
Fortune Brands Home vs. Aberdeen Diversified Income
Performance |
| Timeline |
| Fortune Brands Home |
| Aberdeen Diversified |
Fortune Brands and Aberdeen Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and Aberdeen Diversified
The main advantage of trading using opposite Fortune Brands and Aberdeen Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Aberdeen Diversified 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 Aberdeen Diversified will offset losses from the drop in Aberdeen Diversified's long position.| Fortune Brands vs. Darden Restaurants | Fortune Brands vs. Creo Medical Group | Fortune Brands vs. Gamma Communications PLC | Fortune Brands vs. Verizon Communications |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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