Correlation Between Fair Oaks and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Fair Oaks 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 Fair Oaks and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fair Oaks Income and Fortune Brands Home, you can compare the effects of market volatilities on Fair Oaks 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 Fair Oaks with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Oaks and Fortune Brands.
Diversification Opportunities for Fair Oaks and Fortune Brands
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fair and Fortune is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fair Oaks Income 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 Fair Oaks 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 Fair Oaks Income 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 Fair Oaks i.e., Fair Oaks and Fortune Brands go up and down completely randomly.
Pair Corralation between Fair Oaks and Fortune Brands
Assuming the 90 days trading horizon Fair Oaks is expected to generate 2.36 times less return on investment than Fortune Brands. But when comparing it to its historical volatility, Fair Oaks Income is 3.01 times less risky than Fortune Brands. It trades about 0.09 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,008 in Fortune Brands Home on August 28, 2024 and sell it today you would earn a total of 3,093 from holding Fortune Brands Home or generate 61.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.65% |
| Values | Daily Returns |
Fair Oaks Income vs. Fortune Brands Home
Performance |
| Timeline |
| Fair Oaks Income |
| Fortune Brands Home |
Fair Oaks and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fair Oaks and Fortune Brands
The main advantage of trading using opposite Fair Oaks and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Oaks 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.| Fair Oaks vs. Toyota Motor Corp | Fair Oaks vs. OTP Bank Nyrt | Fair Oaks vs. Yum Brands | Fair Oaks vs. Cognizant Technology Solutions |
| 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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