Correlation Between Fortinet and Block

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

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

Diversification Opportunities for Fortinet and Block

0.96

Correlation Coefficient

Fortinet  Block

Almost no diversification

The 3 months correlation between Fortinet and Block is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc 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 Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Fortinet i.e., Fortinet and Block go up and down completely randomly.

Pair Corralation between Fortinet and Block

Assuming the 90 days trading horizon Fortinet is expected to generate 1.53 times less return on investment than Block. But when comparing it to its historical volatility, Fortinet is 1.54 times less risky than Block. It trades about 0.25 of its potential returns per unit of risk. Block Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,424  in Block Inc on September 13, 2024 and sell it today you would earn a total of  940.00  from holding Block Inc or generate 66.01% 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.  Block Inc

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.

Block Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Block sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortinet and Block

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

The idea behind Fortinet and Block Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.