Correlation Between Fortive and ChemoMetec

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

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

Diversification Opportunities for Fortive and ChemoMetec

0.62

Correlation Coefficient

Fortive  ChemoMetec

Poor diversification

The 3 months correlation between Fortive and ChemoMetec is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fortive and ChemoMetec AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChemoMetec AS and Fortive 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 Fortive are associated (or correlated) with ChemoMetec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChemoMetec AS has no effect on the direction of Fortive i.e., Fortive and ChemoMetec go up and down completely randomly.

Pair Corralation between Fortive and ChemoMetec

Assuming the 90 days horizon Fortive is expected to generate 2.91 times less return on investment than ChemoMetec. But when comparing it to its historical volatility, Fortive is 3.9 times less risky than ChemoMetec. It trades about 0.17 of its potential returns per unit of risk. ChemoMetec AS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,497  in ChemoMetec AS on September 4, 2024 and sell it today you would earn a total of  1,878  from holding ChemoMetec AS or generate 41.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fortive  vs.  ChemoMetec AS

Fortive

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortive reported solid returns over the last few months and may actually be approaching a breakup point.

ChemoMetec AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ChemoMetec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortive and ChemoMetec

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

The idea behind Fortive and ChemoMetec AS 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.