Correlation Between Fortune Brands and Intelligent Living

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

Diversification Opportunities for Fortune Brands and Intelligent Living

0.48

Correlation Coefficient

Fortune Brands  Intelligent Living

Very weak diversification

The 3 months correlation between Fortune and Intelligent is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and Intelligent Living Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intelligent Living 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 Intelligent Living. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intelligent Living has no effect on the direction of Fortune Brands i.e., Fortune Brands and Intelligent Living go up and down completely randomly.

Pair Corralation between Fortune Brands and Intelligent Living

Given the investment horizon of 90 days Fortune Brands Innovations is expected to under-perform the Intelligent Living. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Innovations is 2.57 times less risky than Intelligent Living. The stock trades about -0.43 of its potential returns per unit of risk. The Intelligent Living Application is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Intelligent Living Application on September 25, 2024 and sell it today you would lose (15.00) from holding Intelligent Living Application or give up 14.71% 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.  Intelligent Living Application

Fortune Brands Innov

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Intelligent Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intelligent Living Application has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fortune Brands and Intelligent Living

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

The idea behind Fortune Brands Innovations and Intelligent Living Application 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.