Correlation Between IShares Physical and Fortune Brands

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

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

Diversification Opportunities for IShares Physical and Fortune Brands

0.66

Correlation Coefficient

IShares Physical  Fortune Brands

Poor diversification

The 3 months correlation between IShares and Fortune is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Physical Silver 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 IShares Physical 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 iShares Physical Silver 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 IShares Physical i.e., IShares Physical and Fortune Brands go up and down completely randomly.

Pair Corralation between IShares Physical and Fortune Brands

Assuming the 90 days trading horizon iShares Physical Silver is expected to generate 1.0 times more return on investment than Fortune Brands. However, IShares Physical is 1.0 times more volatile than Fortune Brands Home. It trades about 0.06 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.01 per unit of risk. If you would invest  2,724  in iShares Physical Silver on August 31, 2024 and sell it today you would earn a total of  168.00  from holding iShares Physical Silver or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.38%
Values	Daily Returns

iShares Physical Silver  vs.  Fortune Brands Home

iShares Physical Silver

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Physical Silver are ranked lower than 4 (%) 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 December 2024.

Fortune Brands Home

Risk-Adjusted Performance

1 of 100

Very 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.

Pair Trading with IShares Physical and Fortune Brands

The main advantage of trading using opposite IShares Physical and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Physical 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 iShares Physical Silver 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.