Correlation Between Fortune Brands and GMS
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and GMS 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 GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Brands Innovations and GMS Inc, you can compare the effects of market volatilities on Fortune Brands and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and GMS.
Diversification Opportunities for Fortune Brands and GMS
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fortune and GMS is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 Innovations are associated (or correlated) with GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Fortune Brands i.e., Fortune Brands and GMS go up and down completely randomly.
Pair Corralation between Fortune Brands and GMS
Given the investment horizon of 90 days Fortune Brands Innovations is expected to under-perform the GMS. In addition to that, Fortune Brands is 1.16 times more volatile than GMS Inc. It trades about -0.13 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.26 per unit of volatility. If you would invest 8,995 in GMS Inc on August 30, 2024 and sell it today you would earn a total of 1,027 from holding GMS Inc or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fortune Brands Innovations vs. GMS Inc
Performance |
| Timeline |
| Fortune Brands Innov |
| GMS Inc |
Fortune Brands and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and GMS
The main advantage of trading using opposite Fortune Brands and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| Fortune Brands vs. Trane Technologies plc | Fortune Brands vs. Johnson Controls International | Fortune Brands vs. Lennox International | Fortune Brands vs. Builders FirstSource |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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