Correlation Between Adobe Systems and Fortinet

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Can any of the company-specific risk be diversified away by investing in both Adobe Systems 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 Adobe Systems and Fortinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adobe Systems and Fortinet, you can compare the effects of market volatilities on Adobe Systems 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 Adobe Systems with a short position of Fortinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adobe Systems and Fortinet.

Diversification Opportunities for Adobe Systems and Fortinet

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Adobe and Fortinet is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and Adobe Systems 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 Adobe Systems 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 Adobe Systems i.e., Adobe Systems and Fortinet go up and down completely randomly.

Pair Corralation between Adobe Systems and Fortinet

Given the investment horizon of 90 days Adobe Systems is expected to generate 0.46 times more return on investment than Fortinet. However, Adobe Systems is 2.18 times less risky than Fortinet. It trades about 0.43 of its potential returns per unit of risk. Fortinet is currently generating about -0.05 per unit of risk. If you would invest  37,523  in Adobe Systems on May 18, 2022 and sell it today you would earn a total of  7,579  from holding Adobe Systems or generate 20.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Adobe Systems  vs.  Fortinet

 Performance (%) 
       Timeline  
Adobe Systems 
Adobe Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Adobe Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish fundamental drivers, Adobe Systems exhibited solid returns over the last few months and may actually be approaching a breakup point.

Adobe Price Channel

Fortinet 
Fortinet Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fortinet is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

Fortinet Price Channel

Adobe Systems and Fortinet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adobe Systems and Fortinet

The main advantage of trading using opposite Adobe Systems and Fortinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems 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 Adobe Systems 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.
Check out your portfolio center. 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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