Correlation Between Snowflake and FORTUNE

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Can any of the company-specific risk be diversified away by investing in both Snowflake and FORTUNE 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 Snowflake and FORTUNE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and FORTUNE BRANDS HOME, you can compare the effects of market volatilities on Snowflake and FORTUNE 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 Snowflake with a short position of FORTUNE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and FORTUNE.

Diversification Opportunities for Snowflake and FORTUNE

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Snowflake and FORTUNE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake 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 Snowflake 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 Snowflake are associated (or correlated) with FORTUNE. 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 Snowflake i.e., Snowflake and FORTUNE go up and down completely randomly.

Pair Corralation between Snowflake and FORTUNE

Given the investment horizon of 90 days Snowflake is expected to generate 40.93 times more return on investment than FORTUNE. However, Snowflake is 40.93 times more volatile than FORTUNE BRANDS HOME. It trades about 0.28 of its potential returns per unit of risk. FORTUNE BRANDS HOME is currently generating about -0.12 per unit of risk. If you would invest  11,550  in Snowflake on August 23, 2024 and sell it today you would earn a total of  5,585  from holding Snowflake or generate 48.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy91.3%
ValuesDaily Returns

Snowflake  vs.  FORTUNE BRANDS HOME

 Performance 
       Timeline  
Snowflake 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Snowflake showed solid returns over the last few months and may actually be approaching a breakup point.
FORTUNE BRANDS HOME 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FORTUNE BRANDS HOME has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FORTUNE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Snowflake and FORTUNE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Snowflake and FORTUNE

The main advantage of trading using opposite Snowflake and FORTUNE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, FORTUNE 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 will offset losses from the drop in FORTUNE's long position.
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The idea behind Snowflake and FORTUNE BRANDS HOME pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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