Correlation Between Fortune Brands and Quanex Building

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

Diversification Opportunities for Fortune Brands and Quanex Building

0.45

Correlation Coefficient

Fortune Brands  Quanex Building

Very weak diversification

The 3 months correlation between Fortune and Quanex is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Innovations and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Fortune Brands i.e., Fortune Brands and Quanex Building go up and down completely randomly.

Pair Corralation between Fortune Brands and Quanex Building

Given the investment horizon of 90 days Fortune Brands Innovations is expected to generate 0.61 times more return on investment than Quanex Building. However, Fortune Brands Innovations is 1.64 times less risky than Quanex Building. It trades about -0.1 of its potential returns per unit of risk. Quanex Building Products is currently generating about -0.12 per unit of risk. If you would invest  6,804  in Fortune Brands Innovations on December 28, 2024 and sell it today you would lose (722.00) from holding Fortune Brands Innovations or give up 10.61% 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.  Quanex Building Products

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.

Quanex Building Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fortune Brands and Quanex Building

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

The idea behind Fortune Brands Innovations and Quanex Building Products 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 CEOs Directory module to screen CEOs from public companies around the world.