Correlation Between Louisiana Pacific and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Louisiana Pacific 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 Louisiana Pacific and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Louisiana Pacific and Fortune Brands Innovations, you can compare the effects of market volatilities on Louisiana Pacific 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 Louisiana Pacific with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Louisiana Pacific and Fortune Brands.
Diversification Opportunities for Louisiana Pacific and Fortune Brands
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Louisiana and Fortune is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Louisiana Pacific and Fortune Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Innov and Louisiana Pacific 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 Louisiana Pacific 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 Innov has no effect on the direction of Louisiana Pacific i.e., Louisiana Pacific and Fortune Brands go up and down completely randomly.
Pair Corralation between Louisiana Pacific and Fortune Brands
Considering the 90-day investment horizon Louisiana Pacific is expected to generate 1.01 times more return on investment than Fortune Brands. However, Louisiana Pacific is 1.01 times more volatile than Fortune Brands Innovations. It trades about 0.35 of its potential returns per unit of risk. Fortune Brands Innovations is currently generating about -0.13 per unit of risk. If you would invest 10,195 in Louisiana Pacific on August 27, 2024 and sell it today you would earn a total of 1,827 from holding Louisiana Pacific or generate 17.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Louisiana Pacific vs. Fortune Brands Innovations
Performance |
| Timeline |
| Louisiana Pacific |
| Fortune Brands Innov |
Louisiana Pacific and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Louisiana Pacific and Fortune Brands
The main advantage of trading using opposite Louisiana Pacific and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Louisiana Pacific 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.| Louisiana Pacific vs. Lennox International | Louisiana Pacific vs. Fortune Brands Innovations | Louisiana Pacific vs. Trane Technologies plc | Louisiana Pacific vs. Johnson Controls International |
| Fortune Brands vs. Trex Company | Fortune Brands vs. Gibraltar Industries | Fortune Brands vs. Travis Perkins PLC | Fortune Brands vs. Janus International Group |
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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