Correlation Between Beacon Roofing and Fortune Brands
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
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Beacon and Fortune is -0.36. 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 1.5 times more return on investment than Fortune Brands. However, Beacon Roofing is 1.5 times more volatile than Fortune Brands Innovations. It trades about 0.13 of its potential returns per unit of risk. Fortune Brands Innovations is currently generating about -0.06 per unit of risk. If you would invest 9,065 in Beacon Roofing Supply on August 24, 2024 and sell it today you would earn a total of 1,793 from holding Beacon Roofing Supply or generate 19.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beacon Roofing Supply vs. Fortune Brands Innovations
Performance |
| Timeline |
| Beacon Roofing Supply |
| Fortune Brands Innov |
Beacon Roofing and Fortune Brands Volatility Contrast
Predicted Return Density |
| 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.| Beacon Roofing vs. Quanex Building Products | Beacon Roofing vs. Gibraltar Industries | Beacon Roofing vs. Armstrong World Industries | Beacon Roofing vs. Janus International Group |
| Fortune Brands vs. Trane Technologies plc | Fortune Brands vs. Johnson Controls International | Fortune Brands vs. Lennox International | Fortune Brands vs. Builders FirstSource |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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