Correlation Between AcadeMedia and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both AcadeMedia and Fortune Brands 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 AcadeMedia and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AcadeMedia AB and Fortune Brands Home, you can compare the effects of market volatilities on AcadeMedia and Fortune Brands 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 AcadeMedia with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of AcadeMedia and Fortune Brands.
Diversification Opportunities for AcadeMedia and Fortune Brands
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AcadeMedia and Fortune is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AcadeMedia AB and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and AcadeMedia 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 AcadeMedia AB are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of AcadeMedia i.e., AcadeMedia and Fortune Brands go up and down completely randomly.
Pair Corralation between AcadeMedia and Fortune Brands
Assuming the 90 days trading horizon AcadeMedia is expected to generate 1.51 times less return on investment than Fortune Brands. But when comparing it to its historical volatility, AcadeMedia AB is 1.39 times less risky than Fortune Brands. It trades about 0.06 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,954 in Fortune Brands Home on August 27, 2024 and sell it today you would earn a total of 2,703 from holding Fortune Brands Home or generate 54.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 75.55% |
| Values | Daily Returns |
AcadeMedia AB vs. Fortune Brands Home
Performance |
| Timeline |
| AcadeMedia AB |
| Fortune Brands Home |
AcadeMedia and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AcadeMedia and Fortune Brands
The main advantage of trading using opposite AcadeMedia and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AcadeMedia position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| AcadeMedia vs. Blackrock World Mining | AcadeMedia vs. Endeavour Mining Corp | AcadeMedia vs. JLEN Environmental Assets | AcadeMedia vs. Tata Steel Limited |
| Fortune Brands vs. Molson Coors Beverage | Fortune Brands vs. Cars Inc | Fortune Brands vs. Fevertree Drinks Plc | Fortune Brands vs. Retail Estates 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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