Correlation Between Fortive and Teledyne Technologies

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

By analyzing existing cross correlation between Fortive and Teledyne Technologies Incorporated, you can compare the effects of market volatilities on Fortive and Teledyne Technologies 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 Teledyne Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortive and Teledyne Technologies.

Diversification Opportunities for Fortive and Teledyne Technologies

0.59

Correlation Coefficient

Fortive  Teledyne Technologies

Very weak diversification

The 3 months correlation between Fortive and Teledyne is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fortive and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies 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 Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Fortive i.e., Fortive and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Fortive and Teledyne Technologies

Assuming the 90 days horizon Fortive is expected to generate 6.01 times less return on investment than Teledyne Technologies. But when comparing it to its historical volatility, Fortive is 1.07 times less risky than Teledyne Technologies. It trades about 0.03 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  38,840  in Teledyne Technologies Incorporated on September 27, 2024 and sell it today you would earn a total of  6,050  from holding Teledyne Technologies Incorporated or generate 15.58% return on investment over 90 days.

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

Fortive  vs.  Teledyne Technologies Incorpor

Fortive

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fortive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Teledyne Technologies

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Fortive and Teledyne Technologies

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

The idea behind Fortive and Teledyne Technologies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.