Correlation Between INDCOMMBK CHINA and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both INDCOMMBK CHINA 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 INDCOMMBK CHINA and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INDCOMMBK CHINA ADR20 and Fortune Brands Home, you can compare the effects of market volatilities on INDCOMMBK CHINA 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 INDCOMMBK CHINA with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDCOMMBK CHINA and Fortune Brands.
Diversification Opportunities for INDCOMMBK CHINA and Fortune Brands
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between INDCOMMBK and Fortune is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding INDCOMMBK CHINA ADR20 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 INDCOMMBK CHINA 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 INDCOMMBK CHINA ADR20 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 INDCOMMBK CHINA i.e., INDCOMMBK CHINA and Fortune Brands go up and down completely randomly.
Pair Corralation between INDCOMMBK CHINA and Fortune Brands
Assuming the 90 days trading horizon INDCOMMBK CHINA ADR20 is expected to generate 0.98 times more return on investment than Fortune Brands. However, INDCOMMBK CHINA ADR20 is 1.02 times less risky than Fortune Brands. It trades about 0.34 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.13 per unit of risk. If you would invest 1,131 in INDCOMMBK CHINA ADR20 on November 2, 2024 and sell it today you would earn a total of 139.00 from holding INDCOMMBK CHINA ADR20 or generate 12.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDCOMMBK CHINA ADR20 vs. Fortune Brands Home
Performance |
| Timeline |
| INDCOMMBK CHINA ADR20 |
| Fortune Brands Home |
INDCOMMBK CHINA and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDCOMMBK CHINA and Fortune Brands
The main advantage of trading using opposite INDCOMMBK CHINA and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDCOMMBK CHINA 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.| INDCOMMBK CHINA vs. Industrial and Commercial | INDCOMMBK CHINA vs. CHINA BANK ADR20 | INDCOMMBK CHINA vs. AGRICULTBK HADR25 YC | INDCOMMBK CHINA vs. BANK OCHINA H |
| Fortune Brands vs. Nippon Light Metal | Fortune Brands vs. SIERRA METALS | Fortune Brands vs. BJs Restaurants | Fortune Brands vs. Kaiser Aluminum |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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