Correlation Between Fortune Brands and St Galler

Can any of the company-specific risk be diversified away by investing in both Fortune Brands and St Galler 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 St Galler 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 St Galler Kantonalbank, you can compare the effects of market volatilities on Fortune Brands and St Galler 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 St Galler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and St Galler.

Diversification Opportunities for Fortune Brands and St Galler

-0.9

Correlation Coefficient

Fortune Brands  St Galler

Pay attention - limited upside

The 3 months correlation between Fortune and 0QQZ is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler Kantonalbank 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 St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of Fortune Brands i.e., Fortune Brands and St Galler go up and down completely randomly.

Pair Corralation between Fortune Brands and St Galler

Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the St Galler. In addition to that, Fortune Brands is 2.39 times more volatile than St Galler Kantonalbank. It trades about -0.18 of its total potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.2 per unit of volatility. If you would invest  43,175  in St Galler Kantonalbank on December 2, 2024 and sell it today you would earn a total of  4,075  from holding St Galler Kantonalbank or generate 9.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	79.37%
Values	Daily Returns

Fortune Brands Home  vs.  St Galler Kantonalbank

Fortune Brands Home

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

St Galler Kantonalbank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fortune Brands and St Galler

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

The idea behind Fortune Brands Home and St Galler Kantonalbank 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.