Correlation Between Fortinet and Block

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

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

Diversification Opportunities for Fortinet and Block

-0.51

Correlation Coefficient

Fortinet  Block

Excellent diversification

The 3 months correlation between Fortinet and Block is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc and Fortinet 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 Fortinet are associated (or correlated) with Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Fortinet i.e., Fortinet and Block go up and down completely randomly.

Pair Corralation between Fortinet and Block

Assuming the 90 days trading horizon Fortinet is expected to generate 0.36 times more return on investment than Block. However, Fortinet is 2.78 times less risky than Block. It trades about 0.12 of its potential returns per unit of risk. Block Inc is currently generating about -0.14 per unit of risk. If you would invest  29,087  in Fortinet on December 3, 2024 and sell it today you would earn a total of  2,378  from holding Fortinet or generate 8.18% return on investment over 90 days.

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

Fortinet  vs.  Block Inc

Fortinet

Risk-Adjusted Performance

OK

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

Block Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Block Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fortinet and Block

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

The idea behind Fortinet and Block 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.