Correlation Between HomeToGo and Fortune Brands

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

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

Diversification Opportunities for HomeToGo and Fortune Brands

-0.14

Correlation Coefficient

HomeToGo  Fortune Brands

Good diversification

The 3 months correlation between HomeToGo and Fortune is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE 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 HomeToGo 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 HomeToGo SE 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 HomeToGo i.e., HomeToGo and Fortune Brands go up and down completely randomly.

Pair Corralation between HomeToGo and Fortune Brands

Assuming the 90 days trading horizon HomeToGo SE is expected to under-perform the Fortune Brands. In addition to that, HomeToGo is 1.88 times more volatile than Fortune Brands Home. It trades about -0.05 of its total potential returns per unit of risk. Fortune Brands Home is currently generating about 0.08 per unit of volatility. If you would invest  6,976  in Fortune Brands Home on September 18, 2024 and sell it today you would earn a total of  224.00  from holding Fortune Brands Home or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

HomeToGo SE  vs.  Fortune Brands Home

HomeToGo SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, HomeToGo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 nearly stable basic indicators, Fortune Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HomeToGo and Fortune Brands

The main advantage of trading using opposite HomeToGo and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeToGo 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 HomeToGo SE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.