Correlation Between Couchbase and Fortinet

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

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

Diversification Opportunities for Couchbase and Fortinet

0.79

Correlation Coefficient

Couchbase  Fortinet

Poor diversification

The 3 months correlation between Couchbase and Fortinet is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Couchbase and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and Couchbase 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 Couchbase 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 Couchbase i.e., Couchbase and Fortinet go up and down completely randomly.

Pair Corralation between Couchbase and Fortinet

Given the investment horizon of 90 days Couchbase is expected to under-perform the Fortinet. In addition to that, Couchbase is 1.0 times more volatile than Fortinet. It trades about -0.4 of its total potential returns per unit of risk. Fortinet is currently generating about -0.17 per unit of volatility. If you would invest  6,789  in Fortinet on January 24, 2024 and sell it today you would lose (420.00) from holding Fortinet or give up 6.19% of portfolio value over 90 days.

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

Couchbase  vs.  Fortinet

Couchbase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Couchbase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Couchbase is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fortinet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortinet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fortinet is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Couchbase and Fortinet

The main advantage of trading using opposite Couchbase and Fortinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Couchbase 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 Couchbase 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.