Correlation Between Fortune Brands and Public Storage

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

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

Diversification Opportunities for Fortune Brands and Public Storage

0.4

Correlation Coefficient

Fortune Brands  Public Storage

Very weak diversification

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

Pair Corralation between Fortune Brands and Public Storage

Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the Public Storage. In addition to that, Fortune Brands is 1.13 times more volatile than Public Storage. It trades about -0.21 of its total potential returns per unit of risk. Public Storage is currently generating about -0.17 per unit of volatility. If you would invest  36,005  in Public Storage on September 23, 2024 and sell it today you would lose (5,854) from holding Public Storage or give up 16.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.88%
Values	Daily Returns

Fortune Brands Home  vs.  Public Storage

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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Storage 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fortune Brands and Public Storage

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

The idea behind Fortune Brands Home and Public Storage 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.