Correlation Between GoldMining and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both GoldMining 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 GoldMining and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Fortune Brands Home, you can compare the effects of market volatilities on GoldMining 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 GoldMining with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Fortune Brands.
Diversification Opportunities for GoldMining and Fortune Brands
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GoldMining and Fortune is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining 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 GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and Fortune Brands go up and down completely randomly.
Pair Corralation between GoldMining and Fortune Brands
Assuming the 90 days trading horizon GoldMining is expected to under-perform the Fortune Brands. In addition to that, GoldMining is 1.34 times more volatile than Fortune Brands Home. It trades about -0.14 of its total potential returns per unit of risk. Fortune Brands Home is currently generating about 0.05 per unit of volatility. If you would invest 7,653 in Fortune Brands Home on September 13, 2024 and sell it today you would earn a total of 130.00 from holding Fortune Brands Home or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 66.67% |
| Values | Daily Returns |
GoldMining vs. Fortune Brands Home
Performance |
| Timeline |
| GoldMining |
| Fortune Brands Home |
GoldMining and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and Fortune Brands
The main advantage of trading using opposite GoldMining and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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.| GoldMining vs. Jacquet Metal Service | GoldMining vs. Wheaton Precious Metals | GoldMining vs. Adriatic Metals | GoldMining vs. Telecom Italia SpA |
| Fortune Brands vs. STMicroelectronics NV | Fortune Brands vs. Aeorema Communications Plc | Fortune Brands vs. Charter Communications Cl | Fortune Brands vs. Air Products Chemicals |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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