Correlation Between Fortive Corp and Hexagon AB

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

By analyzing existing cross correlation between Fortive Corp and Hexagon AB ADR, you can compare the effects of market volatilities on Fortive Corp and Hexagon AB 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 Corp with a short position of Hexagon AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortive Corp and Hexagon AB.

Diversification Opportunities for Fortive Corp and Hexagon AB

0.04

Correlation Coefficient

Fortive Corp  Hexagon AB

Significant diversification

The 3 months correlation between Fortive and Hexagon is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Fortive Corp and Hexagon AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon AB ADR and Fortive Corp 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 Corp are associated (or correlated) with Hexagon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon AB ADR has no effect on the direction of Fortive Corp i.e., Fortive Corp and Hexagon AB go up and down completely randomly.

Pair Corralation between Fortive Corp and Hexagon AB

Considering the 90-day investment horizon Fortive Corp is expected to generate 0.51 times more return on investment than Hexagon AB. However, Fortive Corp is 1.95 times less risky than Hexagon AB. It trades about 0.09 of its potential returns per unit of risk. Hexagon AB ADR is currently generating about 0.02 per unit of risk. If you would invest  7,325  in Fortive Corp on September 12, 2024 and sell it today you would earn a total of  503.00  from holding Fortive Corp or generate 6.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Fortive Corp  vs.  Hexagon AB ADR

Fortive Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Fortive Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hexagon AB ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Hexagon AB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fortive Corp and Hexagon AB

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

The idea behind Fortive Corp and Hexagon AB ADR 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .