Correlation Between Fortune Brands and La-Z-Boy Incorporated
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and La-Z-Boy Incorporated 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 La-Z-Boy Incorporated 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 La Z Boy Incorporated, you can compare the effects of market volatilities on Fortune Brands and La-Z-Boy Incorporated 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 La-Z-Boy Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and La-Z-Boy Incorporated.
Diversification Opportunities for Fortune Brands and La-Z-Boy Incorporated
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fortune and La-Z-Boy is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La-Z-Boy Incorporated 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 La-Z-Boy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La-Z-Boy Incorporated has no effect on the direction of Fortune Brands i.e., Fortune Brands and La-Z-Boy Incorporated go up and down completely randomly.
Pair Corralation between Fortune Brands and La-Z-Boy Incorporated
Assuming the 90 days horizon Fortune Brands Home is expected to generate 1.28 times more return on investment than La-Z-Boy Incorporated. However, Fortune Brands is 1.28 times more volatile than La Z Boy Incorporated. It trades about 0.35 of its potential returns per unit of risk. La Z Boy Incorporated is currently generating about 0.32 per unit of risk. If you would invest 6,650 in Fortune Brands Home on October 23, 2024 and sell it today you would earn a total of 550.00 from holding Fortune Brands Home or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortune Brands Home vs. La Z Boy Incorporated
Performance |
| Timeline |
| Fortune Brands Home |
| La-Z-Boy Incorporated |
Fortune Brands and La-Z-Boy Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and La-Z-Boy Incorporated
The main advantage of trading using opposite Fortune Brands and La-Z-Boy Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, La-Z-Boy Incorporated 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 La-Z-Boy Incorporated will offset losses from the drop in La-Z-Boy Incorporated's long position.| Fortune Brands vs. Guangdong Investment Limited | Fortune Brands vs. CHRYSALIS INVESTMENTS LTD | Fortune Brands vs. Goosehead Insurance | Fortune Brands vs. MGIC INVESTMENT |
| La-Z-Boy Incorporated vs. Fortune Brands Home | La-Z-Boy Incorporated vs. Tempur Sealy International | La-Z-Boy Incorporated vs. Hisense Home Appliances | La-Z-Boy Incorporated vs. American Woodmark |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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