Correlation Between Fortune Brands and ViacomCBS

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

Diversification Opportunities for Fortune Brands and ViacomCBS

0.03

Correlation Coefficient

Fortune Brands  ViacomCBS

Significant diversification

The 3 months correlation between Fortune and ViacomCBS is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and ViacomCBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViacomCBS 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 ViacomCBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViacomCBS has no effect on the direction of Fortune Brands i.e., Fortune Brands and ViacomCBS go up and down completely randomly.

Pair Corralation between Fortune Brands and ViacomCBS

Assuming the 90 days trading horizon Fortune Brands is expected to generate 4.51 times less return on investment than ViacomCBS. In addition to that, Fortune Brands is 1.73 times more volatile than ViacomCBS. It trades about 0.02 of its total potential returns per unit of risk. ViacomCBS is currently generating about 0.15 per unit of volatility. If you would invest  972.00  in ViacomCBS on April 23, 2025 and sell it today you would earn a total of  147.00  from holding ViacomCBS or generate 15.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Fortune Brands Home  vs.  ViacomCBS

Fortune Brands Home

Risk-Adjusted Performance

Insignificant

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 rather sound fundamental drivers, Fortune Brands is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ViacomCBS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ViacomCBS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortune Brands and ViacomCBS

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

The idea behind Fortune Brands Home and ViacomCBS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.