Correlation Between Fortune Brands and GreenX Metals

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

Diversification Opportunities for Fortune Brands and GreenX Metals

0.53

Correlation Coefficient

Fortune Brands  GreenX Metals

Very weak diversification

The 3 months correlation between Fortune and GreenX is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals 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 GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Fortune Brands i.e., Fortune Brands and GreenX Metals go up and down completely randomly.

Pair Corralation between Fortune Brands and GreenX Metals

Assuming the 90 days trading horizon Fortune Brands is expected to generate 2.68 times less return on investment than GreenX Metals. But when comparing it to its historical volatility, Fortune Brands Home is 2.63 times less risky than GreenX Metals. It trades about 0.01 of its potential returns per unit of risk. GreenX Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,800  in GreenX Metals on September 3, 2024 and sell it today you would lose (100.00) from holding GreenX Metals or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.62%
Values	Daily Returns

Fortune Brands Home  vs.  GreenX Metals

Fortune Brands Home

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Brands Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fortune Brands is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GreenX Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GreenX Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GreenX Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fortune Brands and GreenX Metals

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

The idea behind Fortune Brands Home and GreenX Metals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.