Correlation Between Fortinet and S1YM34

Can any of the company-specific risk be diversified away by investing in both Fortinet and S1YM34 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 S1YM34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortinet and S1YM34, you can compare the effects of market volatilities on Fortinet and S1YM34 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 S1YM34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortinet and S1YM34.

Diversification Opportunities for Fortinet and S1YM34

0.92

Correlation Coefficient

Fortinet  S1YM34

Almost no diversification

The 3 months correlation between Fortinet and S1YM34 is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and S1YM34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S1YM34 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 S1YM34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S1YM34 has no effect on the direction of Fortinet i.e., Fortinet and S1YM34 go up and down completely randomly.

Pair Corralation between Fortinet and S1YM34

Assuming the 90 days trading horizon Fortinet is expected to generate 13.96 times more return on investment than S1YM34. However, Fortinet is 13.96 times more volatile than S1YM34. It trades about 0.26 of its potential returns per unit of risk. S1YM34 is currently generating about 0.21 per unit of risk. If you would invest  26,919  in Fortinet on September 22, 2024 and sell it today you would earn a total of  2,381  from holding Fortinet or generate 8.85% return on investment over 90 days.

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

Fortinet  vs.  S1YM34

Fortinet

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 18 (%) 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.

S1YM34

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in S1YM34 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, S1YM34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortinet and S1YM34

The main advantage of trading using opposite Fortinet and S1YM34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortinet position performs unexpectedly, S1YM34 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 S1YM34 will offset losses from the drop in S1YM34's long position.

The idea behind Fortinet and S1YM34 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.