Correlation Between Beacon Roofing and Fortune Brands

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Can any of the company-specific risk be diversified away by investing in both Beacon Roofing 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 Beacon Roofing and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beacon Roofing Supply and Fortune Brands Innovations, you can compare the effects of market volatilities on Beacon Roofing 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 Beacon Roofing with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and Fortune Brands.

Diversification Opportunities for Beacon Roofing and Fortune Brands

BeaconFortuneDiversified AwayBeaconFortuneDiversified Away100%
0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Beacon and Fortune is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and Fortune Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Innov and Beacon Roofing 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 Beacon Roofing Supply 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 Innov has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and Fortune Brands go up and down completely randomly.

Pair Corralation between Beacon Roofing and Fortune Brands

Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 0.59 times more return on investment than Fortune Brands. However, Beacon Roofing Supply is 1.68 times less risky than Fortune Brands. It trades about -0.17 of its potential returns per unit of risk. Fortune Brands Innovations is currently generating about -0.33 per unit of risk. If you would invest  11,927  in Beacon Roofing Supply on November 29, 2024 and sell it today you would lose (367.00) from holding Beacon Roofing Supply or give up 3.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Beacon Roofing Supply  vs.  Fortune Brands Innovations

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15BECN FBIN
       Timeline  
Beacon Roofing Supply 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Beacon Roofing is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb100105110115120
Fortune Brands Innov 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Fortune Brands Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6668707274767880

Beacon Roofing and Fortune Brands Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.93-3.69-2.45-1.22-0.02061.212.493.775.056.32 0.050.100.15
JavaScript chart by amCharts 3.21.15BECN FBIN
       Returns  

Pair Trading with Beacon Roofing and Fortune Brands

The main advantage of trading using opposite Beacon Roofing and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing 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.
The idea behind Beacon Roofing Supply and Fortune Brands Innovations pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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