Correlation Between Fortinet and Constellation Software

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

By analyzing existing cross correlation between Fortinet and Constellation Software, you can compare the effects of market volatilities on Fortinet and Constellation Software 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 Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortinet and Constellation Software.

Diversification Opportunities for Fortinet and Constellation Software

0.54

Correlation Coefficient

Fortinet  Constellation Software

Very weak diversification

The 3 months correlation between Fortinet and Constellation is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Fortinet i.e., Fortinet and Constellation Software go up and down completely randomly.

Pair Corralation between Fortinet and Constellation Software

Assuming the 90 days horizon Fortinet is expected to generate 0.88 times more return on investment than Constellation Software. However, Fortinet is 1.14 times less risky than Constellation Software. It trades about 0.17 of its potential returns per unit of risk. Constellation Software is currently generating about 0.03 per unit of risk. If you would invest  7,427  in Fortinet on October 24, 2024 and sell it today you would earn a total of  1,719  from holding Fortinet or generate 23.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Fortinet  vs.  Constellation Software

Fortinet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortinet reported solid returns over the last few months and may actually be approaching a breakup point.

Constellation Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Constellation Software is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fortinet and Constellation Software

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

The idea behind Fortinet and Constellation Software 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.