Correlation Between Fortinet and Fortescue Metal

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

Diversification Opportunities for Fortinet and Fortescue Metal

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Fortinet and Fortescue is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Fortescue Metal Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metal Grp and Fortinet 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 Fortinet are associated (or correlated) with Fortescue Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metal Grp has no effect on the direction of Fortinet i.e., Fortinet and Fortescue Metal go up and down completely randomly.

Pair Corralation between Fortinet and Fortescue Metal

Given the investment horizon of 90 days Fortinet is expected to generate 1.83 times less return on investment than Fortescue Metal. In addition to that, Fortinet is 1.04 times more volatile than Fortescue Metal Grp. It trades about 0.06 of its total potential returns per unit of risk. Fortescue Metal Grp is currently generating about 0.11 per unit of volatility. If you would invest  1,094  in Fortescue Metal Grp on August 31, 2022 and sell it today you would earn a total of  159.00  from holding Fortescue Metal Grp or generate 14.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.62%
ValuesDaily Returns

Fortinet  vs.  Fortescue Metal Grp

 Performance (%) 
       Timeline  
Fortinet 
Fortinet Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fortinet may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Fortinet Price Channel

Fortescue Metal Grp 
Fortescue Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fortescue Metal Grp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Fortescue Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fortescue Price Channel

Fortinet and Fortescue Metal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fortinet and Fortescue Metal

The main advantage of trading using opposite Fortinet and Fortescue Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortinet position performs unexpectedly, Fortescue Metal 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 Fortescue Metal will offset losses from the drop in Fortescue Metal's long position.
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The idea behind Fortinet and Fortescue Metal Grp 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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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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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