Correlation Between Bloomsbury Publishing and Fortune Brands

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

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

Diversification Opportunities for Bloomsbury Publishing and Fortune Brands

0.35

Correlation Coefficient

Bloomsbury Publishing  Fortune Brands

Weak diversification

The 3 months correlation between Bloomsbury and Fortune is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bloomsbury Publishing Plc 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 Bloomsbury Publishing 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 Bloomsbury Publishing Plc 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 Bloomsbury Publishing i.e., Bloomsbury Publishing and Fortune Brands go up and down completely randomly.

Pair Corralation between Bloomsbury Publishing and Fortune Brands

Assuming the 90 days trading horizon Bloomsbury Publishing Plc is expected to generate 0.87 times more return on investment than Fortune Brands. However, Bloomsbury Publishing Plc is 1.15 times less risky than Fortune Brands. It trades about -0.03 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.57 per unit of risk. If you would invest  66,200  in Bloomsbury Publishing Plc on October 10, 2024 and sell it today you would lose (600.00) from holding Bloomsbury Publishing Plc or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.95%
Values	Daily Returns

Bloomsbury Publishing Plc  vs.  Fortune Brands Home

Bloomsbury Publishing Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomsbury Publishing Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bloomsbury Publishing is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Bloomsbury Publishing and Fortune Brands

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