Correlation Between Fortune Brands and IShares Physical

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

Diversification Opportunities for Fortune Brands and IShares Physical

0.65

Correlation Coefficient

Fortune Brands  IShares Physical

Poor diversification

The 3 months correlation between Fortune and IShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and iShares Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Physical Silver 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 IShares Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Physical Silver has no effect on the direction of Fortune Brands i.e., Fortune Brands and IShares Physical go up and down completely randomly.

Pair Corralation between Fortune Brands and IShares Physical

Assuming the 90 days trading horizon Fortune Brands is expected to generate 5.5 times less return on investment than IShares Physical. But when comparing it to its historical volatility, Fortune Brands Home is 1.0 times less risky than IShares Physical. It trades about 0.01 of its potential returns per unit of risk. iShares Physical Silver is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,724  in iShares Physical Silver on September 2, 2024 and sell it today you would earn a total of  209.00  from holding iShares Physical Silver or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.33%
Values	Daily Returns

Fortune Brands Home  vs.  iShares Physical Silver

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.

iShares Physical Silver

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Physical Silver are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, IShares Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fortune Brands and IShares Physical

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

The idea behind Fortune Brands Home and iShares Physical Silver 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.