Correlation Between Fortune Brands and SCOTT TECHNOLOGY

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

Diversification Opportunities for Fortune Brands and SCOTT TECHNOLOGY

-0.37

Correlation Coefficient

Fortune Brands  SCOTT TECHNOLOGY

Very good diversification

The 3 months correlation between Fortune and SCOTT is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of Fortune Brands i.e., Fortune Brands and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between Fortune Brands and SCOTT TECHNOLOGY

Assuming the 90 days trading horizon Fortune Brands Home is expected to generate 0.68 times more return on investment than SCOTT TECHNOLOGY. However, Fortune Brands Home is 1.47 times less risky than SCOTT TECHNOLOGY. It trades about 0.09 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.05 per unit of risk. If you would invest  6,700  in Fortune Brands Home on October 27, 2024 and sell it today you would earn a total of  150.00  from holding Fortune Brands Home or generate 2.24% return on investment over 90 days.

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

Fortune Brands Home  vs.  SCOTT TECHNOLOGY

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.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortune Brands and SCOTT TECHNOLOGY

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

The idea behind Fortune Brands Home and SCOTT TECHNOLOGY 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.