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

0.18

Correlation Coefficient

Electro Sensors  Fortive Corp

Average diversification

The 3 months correlation between Electro and Fortive is 0.18. 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 generate 1.95 times more return on investment than Fortive Corp. However, Electro Sensors is 1.95 times more volatile than Fortive Corp. It trades about 0.21 of its potential returns per unit of risk. Fortive Corp is currently generating about 0.1 per unit of risk. If you would invest  389.00  in Electro Sensors on October 24, 2024 and sell it today you would earn a total of  125.25  from holding Electro Sensors or generate 32.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Electro Sensors  vs.  Fortive Corp

Electro Sensors

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electro Sensors are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Electro Sensors exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fortive Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Fortive Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.