Correlation Between Astar and Fortune Brands

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

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

Diversification Opportunities for Astar and Fortune Brands

-0.19

Correlation Coefficient

Astar  Fortune Brands

Good diversification

The 3 months correlation between Astar and Fortune is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Astar 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 Astar 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 Astar 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 Astar i.e., Astar and Fortune Brands go up and down completely randomly.

Pair Corralation between Astar and Fortune Brands

Assuming the 90 days trading horizon Astar is expected to generate 4.43 times more return on investment than Fortune Brands. However, Astar is 4.43 times more volatile than Fortune Brands Home. It trades about 0.03 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.03 per unit of risk. If you would invest  5.95  in Astar on October 24, 2024 and sell it today you would lose (0.43) from holding Astar or give up 7.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.28%
Values	Daily Returns

Astar  vs.  Fortune Brands Home

Astar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Astar and Fortune Brands

The main advantage of trading using opposite Astar and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar 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 Astar 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.