Correlation Between CLOVER HEALTH and Fortune Brands

Can any of the company-specific risk be diversified away by investing in both CLOVER HEALTH and Fortune Brands 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 CLOVER HEALTH and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CLOVER HEALTH INV and Fortune Brands Home, you can compare the effects of market volatilities on CLOVER HEALTH and Fortune Brands 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 CLOVER HEALTH with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of CLOVER HEALTH and Fortune Brands.

Diversification Opportunities for CLOVER HEALTH and Fortune Brands

0.5

Correlation Coefficient

CLOVER HEALTH  Fortune Brands

Very weak diversification

The 3 months correlation between CLOVER and Fortune is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CLOVER HEALTH INV and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and CLOVER HEALTH 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 CLOVER HEALTH INV are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of CLOVER HEALTH i.e., CLOVER HEALTH and Fortune Brands go up and down completely randomly.

Pair Corralation between CLOVER HEALTH and Fortune Brands

Assuming the 90 days horizon CLOVER HEALTH INV is expected to generate 2.44 times more return on investment than Fortune Brands. However, CLOVER HEALTH is 2.44 times more volatile than Fortune Brands Home. It trades about 0.06 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.13 per unit of risk. If you would invest  307.00  in CLOVER HEALTH INV on December 21, 2024 and sell it today you would earn a total of  28.00  from holding CLOVER HEALTH INV or generate 9.12% return on investment over 90 days.

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

CLOVER HEALTH INV  vs.  Fortune Brands Home

CLOVER HEALTH INV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CLOVER HEALTH INV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CLOVER HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Fortune Brands Home

Risk-Adjusted Performance

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

Pair Trading with CLOVER HEALTH and Fortune Brands

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

The idea behind CLOVER HEALTH INV and Fortune Brands Home 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.