Correlation Between Fortune Brands and Interface
Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Interface 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 Interface 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 Interface, you can compare the effects of market volatilities on Fortune Brands and Interface 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 Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Interface.
Diversification Opportunities for Fortune Brands and Interface
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fortune and Interface is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Fortune Brands i.e., Fortune Brands and Interface go up and down completely randomly.
Pair Corralation between Fortune Brands and Interface
Given the investment horizon of 90 days Fortune Brands Innovations is expected to generate 0.43 times more return on investment than Interface. However, Fortune Brands Innovations is 2.34 times less risky than Interface. It trades about -0.33 of its potential returns per unit of risk. Interface is currently generating about -0.29 per unit of risk. If you would invest 7,268 in Fortune Brands Innovations on November 29, 2024 and sell it today you would lose (706.00) from holding Fortune Brands Innovations or give up 9.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Fortune Brands Innovations vs. Interface
Performance |
Timeline |
Fortune Brands Innov |
Interface |
Fortune Brands and Interface Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fortune Brands and Interface
The main advantage of trading using opposite Fortune Brands and Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Interface 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 Interface will offset losses from the drop in Interface's long position.Fortune Brands vs. Trane Technologies plc | ||
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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