Correlation Between Albion Technology and Fortune Brands

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

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

Diversification Opportunities for Albion Technology and Fortune Brands

0.27

Correlation Coefficient

Albion Technology  Fortune Brands

Modest diversification

The 3 months correlation between Albion and Fortune is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Albion Technology General 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 Albion Technology 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 Albion Technology General 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 Albion Technology i.e., Albion Technology and Fortune Brands go up and down completely randomly.

Pair Corralation between Albion Technology and Fortune Brands

Assuming the 90 days trading horizon Albion Technology is expected to generate 8.64 times less return on investment than Fortune Brands. But when comparing it to its historical volatility, Albion Technology General is 2.91 times less risky than Fortune Brands. It trades about 0.02 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,488  in Fortune Brands Home on September 18, 2024 and sell it today you would earn a total of  2,078  from holding Fortune Brands Home or generate 37.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.95%
Values	Daily Returns

Albion Technology General  vs.  Fortune Brands Home

Albion Technology General

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albion Technology General has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Albion Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Albion Technology and Fortune Brands

The main advantage of trading using opposite Albion Technology and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albion Technology 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 Albion Technology General 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.