Correlation Between LOANDEPOT INC and Fortune Brands

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

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

Diversification Opportunities for LOANDEPOT INC and Fortune Brands

-0.07

Correlation Coefficient

LOANDEPOT INC  Fortune Brands

Good diversification

The 3 months correlation between LOANDEPOT and Fortune is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding LOANDEPOT INC A 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 LOANDEPOT INC 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 LOANDEPOT INC A 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 LOANDEPOT INC i.e., LOANDEPOT INC and Fortune Brands go up and down completely randomly.

Pair Corralation between LOANDEPOT INC and Fortune Brands

Assuming the 90 days horizon LOANDEPOT INC A is expected to generate 2.63 times more return on investment than Fortune Brands. However, LOANDEPOT INC is 2.63 times more volatile than Fortune Brands Home. It trades about -0.17 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.48 per unit of risk. If you would invest  202.00  in LOANDEPOT INC A on October 11, 2024 and sell it today you would lose (25.00) from holding LOANDEPOT INC A or give up 12.38% of portfolio value over 90 days.

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

LOANDEPOT INC A  vs.  Fortune Brands Home

LOANDEPOT INC A

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days LOANDEPOT INC A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LOANDEPOT INC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LOANDEPOT INC and Fortune Brands

The main advantage of trading using opposite LOANDEPOT INC and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOANDEPOT INC 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 LOANDEPOT INC A 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.