Correlation Between Fortinet and Locaweb Servios

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

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

Diversification Opportunities for Fortinet and Locaweb Servios

-0.63

Correlation Coefficient

Fortinet  Locaweb Servios

Excellent diversification

The 3 months correlation between Fortinet and Locaweb is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Locaweb Servios de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locaweb Servios de and Fortinet 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 Fortinet are associated (or correlated) with Locaweb Servios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locaweb Servios de has no effect on the direction of Fortinet i.e., Fortinet and Locaweb Servios go up and down completely randomly.

Pair Corralation between Fortinet and Locaweb Servios

Assuming the 90 days trading horizon Fortinet is expected to generate 0.76 times more return on investment than Locaweb Servios. However, Fortinet is 1.32 times less risky than Locaweb Servios. It trades about 0.25 of its potential returns per unit of risk. Locaweb Servios de is currently generating about -0.11 per unit of risk. If you would invest  21,000  in Fortinet on September 16, 2024 and sell it today you would earn a total of  8,500  from holding Fortinet or generate 40.48% return on investment over 90 days.

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

Fortinet  vs.  Locaweb Servios de

Fortinet

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 19 (%) 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.

Locaweb Servios de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Locaweb Servios de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fortinet and Locaweb Servios

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

The idea behind Fortinet and Locaweb Servios de 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.