Correlation Between Superior Plus and Fortune Brands

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

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

Diversification Opportunities for Superior Plus and Fortune Brands

0.61

Correlation Coefficient

Superior Plus  Fortune Brands

Poor diversification

The 3 months correlation between Superior and Fortune is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp 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 Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Fortune Brands go up and down completely randomly.

Pair Corralation between Superior Plus and Fortune Brands

Assuming the 90 days horizon Superior Plus is expected to generate 1.65 times less return on investment than Fortune Brands. In addition to that, Superior Plus is 1.21 times more volatile than Fortune Brands Home. It trades about 0.06 of its total potential returns per unit of risk. Fortune Brands Home is currently generating about 0.12 per unit of volatility. If you would invest  7,076  in Fortune Brands Home on September 16, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  Fortune Brands Home

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Superior Plus and Fortune Brands

The main advantage of trading using opposite Superior Plus and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus Corp 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.