Correlation Between Fortune Brands and Alpha Pro

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

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

Diversification Opportunities for Fortune Brands and Alpha Pro

0.46

Correlation Coefficient

Fortune Brands  Alpha Pro

Very weak diversification

The 3 months correlation between Fortune and Alpha is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Fortune Brands 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 Fortune Brands Innovations are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Fortune Brands i.e., Fortune Brands and Alpha Pro go up and down completely randomly.

Pair Corralation between Fortune Brands and Alpha Pro

Given the investment horizon of 90 days Fortune Brands Innovations is expected to under-perform the Alpha Pro. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Innovations is 1.2 times less risky than Alpha Pro. The stock trades about -0.09 of its potential returns per unit of risk. The Alpha Pro Tech is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  525.00  in Alpha Pro Tech on December 27, 2024 and sell it today you would lose (7.00) from holding Alpha Pro Tech or give up 1.33% of portfolio value over 90 days.

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

Fortune Brands Innovations  vs.  Alpha Pro Tech

Fortune Brands Innov

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortune Brands Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Alpha Pro Tech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fortune Brands and Alpha Pro

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

The idea behind Fortune Brands Innovations and Alpha Pro Tech 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.