Correlation Between Fortune Brands and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Mercantile Investment 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 Mercantile Investment 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 The Mercantile Investment, you can compare the effects of market volatilities on Fortune Brands and Mercantile Investment 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 Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Mercantile Investment.
Diversification Opportunities for Fortune Brands and Mercantile Investment
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fortune and Mercantile is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment 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 Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Fortune Brands i.e., Fortune Brands and Mercantile Investment go up and down completely randomly.
Pair Corralation between Fortune Brands and Mercantile Investment
Assuming the 90 days trading horizon Fortune Brands Home is expected to generate 1.75 times more return on investment than Mercantile Investment. However, Fortune Brands is 1.75 times more volatile than The Mercantile Investment. It trades about 0.06 of its potential returns per unit of risk. The Mercantile Investment is currently generating about 0.05 per unit of risk. If you would invest 5,125 in Fortune Brands Home on August 30, 2024 and sell it today you would earn a total of 2,704 from holding Fortune Brands Home or generate 52.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.7% |
| Values | Daily Returns |
Fortune Brands Home vs. The Mercantile Investment
Performance |
| Timeline |
| Fortune Brands Home |
| The Mercantile Investment |
Fortune Brands and Mercantile Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and Mercantile Investment
The main advantage of trading using opposite Fortune Brands and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.| Fortune Brands vs. Lendinvest PLC | Fortune Brands vs. Neometals | Fortune Brands vs. Albion Technology General | Fortune Brands vs. Jupiter Fund Management |
| Mercantile Investment vs. LPKF Laser Electronics | Mercantile Investment vs. Gaming Realms plc | Mercantile Investment vs. Compal Electronics GDR | Mercantile Investment vs. Flow Traders NV |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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