Correlation Between Fortune Brands and La Z

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

Diversification Opportunities for Fortune Brands and La Z

0.02

Correlation Coefficient

Fortune Brands  La Z

Significant diversification

The 3 months correlation between Fortune and LZB is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Z Boy 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 La Z. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Z Boy has no effect on the direction of Fortune Brands i.e., Fortune Brands and La Z go up and down completely randomly.

Pair Corralation between Fortune Brands and La Z

If you would invest (100.00) in Fortune Brands Home on January 26, 2024 and sell it today you would earn a total of  100.00  from holding Fortune Brands Home or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Fortune Brands Home  vs.  La Z Boy Incorporated

Fortune Brands Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Brands Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Fortune Brands is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

La Z Boy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days La Z Boy Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, La Z is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fortune Brands and La Z

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

The idea behind Fortune Brands Home and La Z Boy Incorporated 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.