Correlation Between Hexagon AB and Fortive Corp

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

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

Diversification Opportunities for Hexagon AB and Fortive Corp

0.03

Correlation Coefficient

Hexagon AB  Fortive Corp

Significant diversification

The 3 months correlation between Hexagon and Fortive is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB ADR and Fortive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive Corp and Hexagon AB 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 Hexagon AB ADR are associated (or correlated) with Fortive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortive Corp has no effect on the direction of Hexagon AB i.e., Hexagon AB and Fortive Corp go up and down completely randomly.

Pair Corralation between Hexagon AB and Fortive Corp

Assuming the 90 days horizon Hexagon AB is expected to generate 2.23 times less return on investment than Fortive Corp. In addition to that, Hexagon AB is 1.9 times more volatile than Fortive Corp. It trades about 0.01 of its total potential returns per unit of risk. Fortive Corp is currently generating about 0.06 per unit of volatility. If you would invest  7,353  in Fortive Corp on September 13, 2024 and sell it today you would earn a total of  330.00  from holding Fortive Corp or generate 4.49% return on investment over 90 days.

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

Hexagon AB ADR  vs.  Fortive Corp

Hexagon AB ADR

Risk-Adjusted Performance

1 of 100

Very 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Fortive Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fortive Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hexagon AB and Fortive Corp

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

The idea behind Hexagon AB ADR and Fortive Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.