Correlation Between Fortune Brands and Lendinvest PLC
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Lendinvest 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 Lendinvest 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 Lendinvest PLC, you can compare the effects of market volatilities on Fortune Brands and Lendinvest 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 Lendinvest PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Lendinvest PLC.
Diversification Opportunities for Fortune Brands and Lendinvest PLC
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fortune and Lendinvest is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Lendinvest PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendinvest 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 Lendinvest PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendinvest PLC has no effect on the direction of Fortune Brands i.e., Fortune Brands and Lendinvest PLC go up and down completely randomly.
Pair Corralation between Fortune Brands and Lendinvest PLC
Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Lendinvest PLC. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Home is 1.29 times less risky than Lendinvest PLC. The stock trades about -0.37 of its potential returns per unit of risk. The Lendinvest PLC is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 2,350 in Lendinvest PLC on November 28, 2024 and sell it today you would earn a total of 400.00 from holding Lendinvest PLC or generate 17.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 86.36% |
| Values | Daily Returns |
Fortune Brands Home vs. Lendinvest PLC
Performance |
| Timeline |
| Fortune Brands Home |
| Lendinvest PLC |
Fortune Brands and Lendinvest PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and Lendinvest PLC
The main advantage of trading using opposite Fortune Brands and Lendinvest PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Lendinvest 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 Lendinvest PLC will offset losses from the drop in Lendinvest PLC's long position.| Fortune Brands vs. Ryanair Holdings plc | Fortune Brands vs. Gaztransport et Technigaz | Fortune Brands vs. Ecofin Global Utilities | Fortune Brands vs. Coor Service Management |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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