Correlation Between American Express and Fortinet

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

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

Diversification Opportunities for American Express and Fortinet

0.21

Correlation Coefficient

American Express  Fortinet

Modest diversification

The 3 months correlation between American and Fortinet is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and American Express 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 American Express 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 American Express i.e., American Express and Fortinet go up and down completely randomly.

Pair Corralation between American Express and Fortinet

Considering the 90-day investment horizon American Express is expected to under-perform the Fortinet. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 1.08 times less risky than Fortinet. The stock trades about -0.08 of its potential returns per unit of risk. The Fortinet is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,513  in Fortinet on December 29, 2024 and sell it today you would earn a total of  441.00  from holding Fortinet or generate 4.64% return on investment over 90 days.

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

American Express  vs.  Fortinet

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Fortinet

Risk-Adjusted Performance

Insignificant

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 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 American Express and Fortinet

The main advantage of trading using opposite American Express and Fortinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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 American Express 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.