Correlation Between Fortive Corp and Electro Sensors
Can any of the company-specific risk be diversified away by investing in both Fortive Corp and Electro Sensors 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 Fortive Corp and Electro Sensors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortive Corp and Electro Sensors, you can compare the effects of market volatilities on Fortive Corp and Electro Sensors 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 Fortive Corp with a short position of Electro Sensors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortive Corp and Electro Sensors.
Diversification Opportunities for Fortive Corp and Electro Sensors
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fortive and Electro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fortive Corp and Electro-Sensors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro-Sensors and Fortive Corp 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 Fortive Corp are associated (or correlated) with Electro Sensors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro-Sensors has no effect on the direction of Fortive Corp i.e., Fortive Corp and Electro Sensors go up and down completely randomly.
Pair Corralation between Fortive Corp and Electro Sensors
Considering the 90-day investment horizon Fortive Corp is expected to generate 0.66 times more return on investment than Electro Sensors. However, Fortive Corp is 1.51 times less risky than Electro Sensors. It trades about 0.07 of its potential returns per unit of risk. Electro Sensors is currently generating about -0.01 per unit of risk. If you would invest 6,689 in Fortive Corp on December 20, 2023 and sell it today you would earn a total of 1,833 from holding Fortive Corp or generate 27.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.31% |
Values | Daily Returns |
Fortive Corp vs. Electro-Sensors
Performance |
Timeline |
Fortive Corp |
Electro-Sensors |
Fortive Corp and Electro Sensors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fortive Corp and Electro Sensors
The main advantage of trading using opposite Fortive Corp and Electro Sensors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortive Corp position performs unexpectedly, Electro Sensors 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 Electro Sensors will offset losses from the drop in Electro Sensors' long position.Fortive Corp vs. Sensata Technologies Holding | Fortive Corp vs. Electro Sensors | Fortive Corp vs. Energous | Fortive Corp vs. Wrap Technologies |
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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 the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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