Correlation Between Fortune Brands and SIDETRADE

Can any of the company-specific risk be diversified away by investing in both Fortune Brands and SIDETRADE 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 SIDETRADE 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 SIDETRADE EO 1, you can compare the effects of market volatilities on Fortune Brands and SIDETRADE 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 SIDETRADE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and SIDETRADE.

Diversification Opportunities for Fortune Brands and SIDETRADE

0.06

Correlation Coefficient

Fortune Brands  SIDETRADE

Significant diversification

The 3 months correlation between Fortune and SIDETRADE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and SIDETRADE EO 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIDETRADE EO 1 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 SIDETRADE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIDETRADE EO 1 has no effect on the direction of Fortune Brands i.e., Fortune Brands and SIDETRADE go up and down completely randomly.

Pair Corralation between Fortune Brands and SIDETRADE

Assuming the 90 days horizon Fortune Brands Home is expected to generate 1.66 times more return on investment than SIDETRADE. However, Fortune Brands is 1.66 times more volatile than SIDETRADE EO 1. It trades about 0.12 of its potential returns per unit of risk. SIDETRADE EO 1 is currently generating about -0.32 per unit of risk. If you would invest  7,076  in Fortune Brands Home on September 15, 2024 and sell it today you would earn a total of  324.00  from holding Fortune Brands Home or generate 4.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fortune Brands Home  vs.  SIDETRADE EO 1

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. Despite nearly stable basic indicators, Fortune Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SIDETRADE EO 1

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIDETRADE EO 1 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIDETRADE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fortune Brands and SIDETRADE

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

The idea behind Fortune Brands Home and SIDETRADE EO 1 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.