Correlation Between ATCO and Fortis

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

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

Diversification Opportunities for ATCO and Fortis

0.69

Correlation Coefficient

ATCO  Fortis

Poor diversification

The 3 months correlation between ATCO and Fortis is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ATCO and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc and ATCO 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 ATCO are associated (or correlated) with Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of ATCO i.e., ATCO and Fortis go up and down completely randomly.

Pair Corralation between ATCO and Fortis

Assuming the 90 days trading horizon ATCO is expected to under-perform the Fortis. In addition to that, ATCO is 1.14 times more volatile than Fortis Inc. It trades about -0.33 of its total potential returns per unit of risk. Fortis Inc is currently generating about -0.35 per unit of volatility. If you would invest  6,299  in Fortis Inc on October 6, 2024 and sell it today you would lose (295.00) from holding Fortis Inc or give up 4.68% of portfolio value over 90 days.

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

ATCO  vs.  Fortis Inc

ATCO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fortis Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fortis is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ATCO and Fortis

The main advantage of trading using opposite ATCO and Fortis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATCO position performs unexpectedly, Fortis 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 Fortis will offset losses from the drop in Fortis' long position.

The idea behind ATCO and Fortis Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.