Correlation Between APA and Fortinet

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

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

Diversification Opportunities for APA and Fortinet

-0.48

Correlation Coefficient

APA  Fortinet

Very good diversification

The 3 months correlation between APA and Fortinet is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and APA 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 APA Corporation are associated (or correlated) with Fortinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortinet has no effect on the direction of APA i.e., APA and Fortinet go up and down completely randomly.

Pair Corralation between APA and Fortinet

Assuming the 90 days trading horizon APA Corporation is expected to under-perform the Fortinet. In addition to that, APA is 1.08 times more volatile than Fortinet. It trades about -0.03 of its total potential returns per unit of risk. Fortinet is currently generating about 0.23 per unit of volatility. If you would invest  21,400  in Fortinet on September 23, 2024 and sell it today you would earn a total of  7,900  from holding Fortinet or generate 36.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

APA Corp.  vs.  Fortinet

APA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fortinet

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fortinet sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Fortinet

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

The idea behind APA Corporation and Fortinet 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.