Correlation Between Fortune Brands and SERI INDUSTRIAL

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

Diversification Opportunities for Fortune Brands and SERI INDUSTRIAL

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fortune and SERI is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO 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 SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of Fortune Brands i.e., Fortune Brands and SERI INDUSTRIAL go up and down completely randomly.

Pair Corralation between Fortune Brands and SERI INDUSTRIAL

Assuming the 90 days horizon Fortune Brands is expected to generate 176.0 times less return on investment than SERI INDUSTRIAL. But when comparing it to its historical volatility, Fortune Brands Home is 2.03 times less risky than SERI INDUSTRIAL. It trades about 0.0 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  278.00  in SERI INDUSTRIAL EO on October 9, 2024 and sell it today you would lose (25.00) from holding SERI INDUSTRIAL EO or give up 8.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fortune Brands Home  vs.  SERI INDUSTRIAL EO

 Performance 
       Timeline  
Fortune Brands Home 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
SERI INDUSTRIAL EO 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SERI INDUSTRIAL EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fortune Brands and SERI INDUSTRIAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fortune Brands and SERI INDUSTRIAL

The main advantage of trading using opposite Fortune Brands and SERI INDUSTRIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands position performs unexpectedly, SERI INDUSTRIAL 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 SERI INDUSTRIAL will offset losses from the drop in SERI INDUSTRIAL's long position.
The idea behind Fortune Brands Home and SERI INDUSTRIAL EO 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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