Correlation Between Fortune Brands and Intermediate Capital

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

Diversification Opportunities for Fortune Brands and Intermediate Capital

0.09

Correlation Coefficient

Fortune Brands  Intermediate Capital

Significant diversification

The 3 months correlation between Fortune and Intermediate is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital 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 Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of Fortune Brands i.e., Fortune Brands and Intermediate Capital go up and down completely randomly.

Pair Corralation between Fortune Brands and Intermediate Capital

Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Intermediate Capital. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Home is 1.04 times less risky than Intermediate Capital. The stock trades about -0.26 of its potential returns per unit of risk. The Intermediate Capital Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  204,723  in Intermediate Capital Group on October 10, 2024 and sell it today you would earn a total of  6,077  from holding Intermediate Capital Group or generate 2.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.89%
Values	Daily Returns

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

Intermediate Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Capital Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fortune Brands and Intermediate Capital

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

The idea behind Fortune Brands Home and Intermediate Capital 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.