Correlation Between Fossil and Installed Building

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

By analyzing existing cross correlation between Fossil Group and Installed Building Products, you can compare the effects of market volatilities on Fossil and Installed 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 Fossil with a short position of Installed Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fossil and Installed Building.

Diversification Opportunities for Fossil and Installed Building

-0.4

Correlation Coefficient

Fossil  Installed Building

Very good diversification

The 3 months correlation between Fossil and Installed is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building and Fossil 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 Fossil Group are associated (or correlated) with Installed Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of Fossil i.e., Fossil and Installed Building go up and down completely randomly.

Pair Corralation between Fossil and Installed Building

Given the investment horizon of 90 days Fossil Group is expected to generate 3.25 times more return on investment than Installed Building. However, Fossil is 3.25 times more volatile than Installed Building Products. It trades about 0.15 of its potential returns per unit of risk. Installed Building Products is currently generating about -0.06 per unit of risk. If you would invest  103.00  in Fossil Group on September 15, 2024 and sell it today you would earn a total of  96.00  from holding Fossil Group or generate 93.2% return on investment over 90 days.

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

Fossil Group  vs.  Installed Building Products

Fossil Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fossil Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Fossil disclosed solid returns over the last few months and may actually be approaching a breakup point.

Installed Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Installed Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's fundamental drivers 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 Fossil and Installed Building

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

The idea behind Fossil Group and Installed 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.