Correlation Between Fortune Brands and Sligro Food

Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Sligro Food 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 Sligro Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortune Brands Home and Sligro Food Group, you can compare the effects of market volatilities on Fortune Brands and Sligro Food 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 Sligro Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Sligro Food.

Diversification Opportunities for Fortune Brands and Sligro Food

0.79

Correlation Coefficient

Fortune Brands  Sligro Food

Poor diversification

The 3 months correlation between Fortune and Sligro is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Sligro Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sligro Food Group 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 Home are associated (or correlated) with Sligro Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sligro Food Group has no effect on the direction of Fortune Brands i.e., Fortune Brands and Sligro Food go up and down completely randomly.

Pair Corralation between Fortune Brands and Sligro Food

Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Sligro Food. In addition to that, Fortune Brands is 1.47 times more volatile than Sligro Food Group. It trades about -0.24 of its total potential returns per unit of risk. Sligro Food Group is currently generating about -0.17 per unit of volatility. If you would invest  1,269  in Sligro Food Group on September 30, 2024 and sell it today you would lose (154.00) from holding Sligro Food Group or give up 12.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.06%
Values	Daily Returns

Fortune Brands Home  vs.  Sligro Food Group

Fortune Brands Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Brands Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sligro Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sligro Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Fortune Brands and Sligro Food

The main advantage of trading using opposite Fortune Brands and Sligro Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, Sligro Food 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 Sligro Food will offset losses from the drop in Sligro Food's long position.

The idea behind Fortune Brands Home and Sligro Food Group 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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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.