Correlation Between GEELY AUTOMOBILE and Fortune Brands

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

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

Diversification Opportunities for GEELY AUTOMOBILE and Fortune Brands

-0.65

Correlation Coefficient

GEELY AUTOMOBILE  Fortune Brands

Excellent diversification

The 3 months correlation between GEELY and Fortune is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Fortune Brands go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and Fortune Brands

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 1.04 times more return on investment than Fortune Brands. However, GEELY AUTOMOBILE is 1.04 times more volatile than Fortune Brands Home. It trades about -0.28 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.41 per unit of risk. If you would invest  192.00  in GEELY AUTOMOBILE on October 9, 2024 and sell it today you would lose (15.00) from holding GEELY AUTOMOBILE or give up 7.81% of portfolio value over 90 days.

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

GEELY AUTOMOBILE  vs.  Fortune Brands Home

GEELY AUTOMOBILE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fortune Brands Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Brands Home 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 fundamental drivers remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GEELY AUTOMOBILE and Fortune Brands

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

The idea behind GEELY AUTOMOBILE and Fortune Brands Home 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.