Correlation Between Gibraltar Industries and Fortune Brands

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

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

Diversification Opportunities for Gibraltar Industries and Fortune Brands

0.1

Correlation Coefficient

Gibraltar Industries  Fortune Brands

Average diversification

The 3 months correlation between Gibraltar and Fortune is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gibraltar Industries and Fortune Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Innov and Gibraltar Industries 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 Gibraltar Industries 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 Innov has no effect on the direction of Gibraltar Industries i.e., Gibraltar Industries and Fortune Brands go up and down completely randomly.

Pair Corralation between Gibraltar Industries and Fortune Brands

Given the investment horizon of 90 days Gibraltar Industries is expected to under-perform the Fortune Brands. But the stock apears to be less risky and, when comparing its historical volatility, Gibraltar Industries is 1.18 times less risky than Fortune Brands. The stock trades about -0.71 of its potential returns per unit of risk. The Fortune Brands Innovations is currently generating about -0.44 of returns per unit of risk over similar time horizon. If you would invest  8,096  in Fortune Brands Innovations on September 24, 2024 and sell it today you would lose (1,129) from holding Fortune Brands Innovations or give up 13.95% of portfolio value over 90 days.

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

Gibraltar Industries  vs.  Fortune Brands Innovations

Gibraltar Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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.

Pair Trading with Gibraltar Industries and Fortune Brands

The main advantage of trading using opposite Gibraltar Industries and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gibraltar Industries 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 Gibraltar Industries and Fortune Brands Innovations 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.