Correlation Between S1YM34 and Fortinet

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

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

Diversification Opportunities for S1YM34 and Fortinet

0.88

Correlation Coefficient

S1YM34  Fortinet

Very poor diversification

The 3 months correlation between S1YM34 and Fortinet is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding S1YM34 and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and S1YM34 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 S1YM34 are associated (or correlated) with Fortinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortinet has no effect on the direction of S1YM34 i.e., S1YM34 and Fortinet go up and down completely randomly.

Pair Corralation between S1YM34 and Fortinet

Assuming the 90 days trading horizon S1YM34 is expected to generate 1.05 times less return on investment than Fortinet. In addition to that, S1YM34 is 1.52 times more volatile than Fortinet. It trades about 0.14 of its total potential returns per unit of risk. Fortinet is currently generating about 0.23 per unit of volatility. If you would invest  21,400  in Fortinet on September 23, 2024 and sell it today you would earn a total of  7,900  from holding Fortinet or generate 36.92% return on investment over 90 days.

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

S1YM34  vs.  Fortinet

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 uncertain basic indicators, S1YM34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Fortinet

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 17 (%) 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.

Pair Trading with S1YM34 and Fortinet

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

The idea behind S1YM34 and Fortinet 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.