Correlation Between Fortune Brands and Carrier Global

Can any of the company-specific risk be diversified away by investing in both Fortune Brands and Carrier Global 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 Carrier Global 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 Carrier Global Corp, you can compare the effects of market volatilities on Fortune Brands and Carrier Global 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 Carrier Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Carrier Global.

Diversification Opportunities for Fortune Brands and Carrier Global

0.39

Correlation Coefficient

Fortune Brands  Carrier Global

Weak diversification

The 3 months correlation between Fortune and Carrier is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and Carrier Global Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrier Global Corp 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 Carrier Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrier Global Corp has no effect on the direction of Fortune Brands i.e., Fortune Brands and Carrier Global go up and down completely randomly.

Pair Corralation between Fortune Brands and Carrier Global

Given the investment horizon of 90 days Fortune Brands Innovations is expected to under-perform the Carrier Global. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Innovations is 1.15 times less risky than Carrier Global. The stock trades about -0.07 of its potential returns per unit of risk. The Carrier Global Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,823  in Carrier Global Corp on December 29, 2024 and sell it today you would lose (490.00) from holding Carrier Global Corp or give up 7.18% of portfolio value over 90 days.

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

Fortune Brands Innovations  vs.  Carrier Global Corp

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.

Carrier Global Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carrier Global Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Fortune Brands and Carrier Global

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

The idea behind Fortune Brands Innovations and Carrier Global Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.