Correlation Between Fortune Brands and St Galler

Can any of the company-specific risk be diversified away by investing in both Fortune Brands and St Galler 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 St Galler 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 St Galler Kantonalbank, you can compare the effects of market volatilities on Fortune Brands and St Galler 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 St Galler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and St Galler.

Diversification Opportunities for Fortune Brands and St Galler

0.32

Correlation Coefficient

Fortune Brands  St Galler

Weak diversification

The 3 months correlation between Fortune and 0QQZ is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler Kantonalbank 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 St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of Fortune Brands i.e., Fortune Brands and St Galler go up and down completely randomly.

Pair Corralation between Fortune Brands and St Galler

Assuming the 90 days trading horizon Fortune Brands is expected to generate 1.27 times less return on investment than St Galler. In addition to that, Fortune Brands is 2.69 times more volatile than St Galler Kantonalbank. It trades about 0.01 of its total potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.04 per unit of volatility. If you would invest  41,700  in St Galler Kantonalbank on September 3, 2024 and sell it today you would earn a total of  750.00  from holding St Galler Kantonalbank or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.62%
Values	Daily Returns

Fortune Brands Home  vs.  St Galler Kantonalbank

Fortune Brands Home

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Brands Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fortune Brands is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

St Galler Kantonalbank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, St Galler is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fortune Brands and St Galler

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

The idea behind Fortune Brands Home and St Galler Kantonalbank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.