Correlation Between Batm Advanced and Fortune Brands

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

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

Diversification Opportunities for Batm Advanced and Fortune Brands

-0.22

Correlation Coefficient

Batm Advanced  Fortune Brands

Very good diversification

The 3 months correlation between Batm and Fortune is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Batm Advanced Communications 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 Batm Advanced 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 Batm Advanced Communications 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 Batm Advanced i.e., Batm Advanced and Fortune Brands go up and down completely randomly.

Pair Corralation between Batm Advanced and Fortune Brands

Assuming the 90 days trading horizon Batm Advanced Communications is expected to under-perform the Fortune Brands. In addition to that, Batm Advanced is 2.0 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 0.03 per unit of volatility. If you would invest  7,672  in Fortune Brands Home on September 4, 2024 and sell it today you would earn a total of  173.00  from holding Fortune Brands Home or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.62%
Values	Daily Returns

Batm Advanced Communications  vs.  Fortune Brands Home

Batm Advanced Commun

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Batm Advanced Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Fortune Brands Home

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Brands Home are ranked lower than 2 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Batm Advanced and Fortune Brands

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