Correlation Between Fortune Brands and Owens Corning
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Owens Corning 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 Owens Corning 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 Owens Corning, you can compare the effects of market volatilities on Fortune Brands and Owens Corning 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 Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Owens Corning.
Diversification Opportunities for Fortune Brands and Owens Corning
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fortune and Owens is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Fortune Brands i.e., Fortune Brands and Owens Corning go up and down completely randomly.
Pair Corralation between Fortune Brands and Owens Corning
Given the investment horizon of 90 days Fortune Brands Innovations is expected to under-perform the Owens Corning. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Innovations is 1.11 times less risky than Owens Corning. The stock trades about -0.06 of its potential returns per unit of risk. The Owens Corning is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 17,086 in Owens Corning on August 24, 2024 and sell it today you would earn a total of 2,672 from holding Owens Corning or generate 15.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortune Brands Innovations vs. Owens Corning
Performance |
| Timeline |
| Fortune Brands Innov |
| Owens Corning |
Fortune Brands and Owens Corning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and Owens Corning
The main advantage of trading using opposite Fortune Brands and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Owens Corning 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 Owens Corning will offset losses from the drop in Owens Corning'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 |
| Owens Corning vs. Trane Technologies plc | Owens Corning vs. Masco | Owens Corning vs. Quanex Building Products | Owens Corning vs. Jeld Wen Holding |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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