Correlation Between Electro Sensors and Fortive Corp

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

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

Diversification Opportunities for Electro Sensors and Fortive Corp

0.37

Correlation Coefficient

Electro Sensors  Fortive Corp

Weak diversification

The 3 months correlation between Electro and Fortive is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Electro Sensors and Fortive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive Corp and Electro Sensors 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 Electro Sensors 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 Electro Sensors i.e., Electro Sensors and Fortive Corp go up and down completely randomly.

Pair Corralation between Electro Sensors and Fortive Corp

Given the investment horizon of 90 days Electro Sensors is expected to under-perform the Fortive Corp. In addition to that, Electro Sensors is 1.6 times more volatile than Fortive Corp. It trades about 0.0 of its total potential returns per unit of risk. Fortive Corp is currently generating about 0.05 per unit of volatility. If you would invest  5,724  in Fortive Corp on January 17, 2024 and sell it today you would earn a total of  2,436  from holding Fortive Corp or generate 42.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Electro Sensors  vs.  Fortive Corp

Electro Sensors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electro Sensors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Electro Sensors is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fortive Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Fortive Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electro Sensors and Fortive Corp

The main advantage of trading using opposite Electro Sensors and Fortive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electro Sensors 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 Electro Sensors 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.

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 the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.