Correlation Between FORTUNE and Trupanion

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

By analyzing existing cross correlation between FORTUNE BRANDS INC and Trupanion, you can compare the effects of market volatilities on FORTUNE and Trupanion 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 with a short position of Trupanion. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORTUNE and Trupanion.

Diversification Opportunities for FORTUNE and Trupanion

0.37

Correlation Coefficient

FORTUNE  Trupanion

Weak diversification

The 3 months correlation between FORTUNE and Trupanion is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding FORTUNE BRANDS INC and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion and FORTUNE 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 INC are associated (or correlated) with Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of FORTUNE i.e., FORTUNE and Trupanion go up and down completely randomly.

Pair Corralation between FORTUNE and Trupanion

Assuming the 90 days trading horizon FORTUNE BRANDS INC is expected to under-perform the Trupanion. But the bond apears to be less risky and, when comparing its historical volatility, FORTUNE BRANDS INC is 2.98 times less risky than Trupanion. The bond trades about -0.31 of its potential returns per unit of risk. The Trupanion is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,655  in Trupanion on September 14, 2024 and sell it today you would earn a total of  686.00  from holding Trupanion or generate 14.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	31.75%
Values	Daily Returns

FORTUNE BRANDS INC  vs.  Trupanion

FORTUNE BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORTUNE BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for FORTUNE BRANDS INC investors.

Trupanion

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORTUNE and Trupanion

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

The idea behind FORTUNE BRANDS INC and Trupanion 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.