Correlation Between Fortress Transportation and GATX

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

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

Diversification Opportunities for Fortress Transportation and GATX

-0.32

Correlation Coefficient

Fortress Transportation  GATX

Very good diversification

The 3 months correlation between Fortress and GATX is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Transportation and and GATX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GATX and Fortress Transportation 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 Fortress Transportation and are associated (or correlated) with GATX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GATX has no effect on the direction of Fortress Transportation i.e., Fortress Transportation and GATX go up and down completely randomly.

Pair Corralation between Fortress Transportation and GATX

Assuming the 90 days horizon Fortress Transportation is expected to generate 11.21 times less return on investment than GATX. But when comparing it to its historical volatility, Fortress Transportation and is 3.53 times less risky than GATX. It trades about 0.06 of its potential returns per unit of risk. GATX Corporation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  13,461  in GATX Corporation on September 2, 2024 and sell it today you would earn a total of  2,955  from holding GATX Corporation or generate 21.95% return on investment over 90 days.

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

Fortress Transportation and  vs.  GATX Corp.

Fortress Transportation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Transportation and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Fortress Transportation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

GATX

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, GATX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortress Transportation and GATX

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

The idea behind Fortress Transportation and and GATX Corporation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.