Correlation Between Fortune Brands and PCI PAL

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

Diversification Opportunities for Fortune Brands and PCI PAL

0.09

Correlation Coefficient

Fortune Brands  PCI PAL

Significant diversification

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

Pair Corralation between Fortune Brands and PCI PAL

Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the PCI PAL. In addition to that, Fortune Brands is 1.44 times more volatile than PCI PAL PLC. It trades about -0.26 of its total potential returns per unit of risk. PCI PAL PLC is currently generating about 0.02 per unit of volatility. If you would invest  6,550  in PCI PAL PLC on October 7, 2024 and sell it today you would earn a total of  50.00  from holding PCI PAL PLC or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.24%
Values	Daily Returns

Fortune Brands Home  vs.  PCI PAL PLC

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

PCI PAL PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PCI PAL PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, PCI PAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortune Brands and PCI PAL

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

The idea behind Fortune Brands Home and PCI PAL PLC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.