Correlation Between Fortinet and Galp Energia

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

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

Diversification Opportunities for Fortinet and Galp Energia

-0.79

Correlation Coefficient

Fortinet  Galp Energia

Pay attention - limited upside

The 3 months correlation between Fortinet and Galp is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS 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 Galp Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energia SGPS has no effect on the direction of Fortinet i.e., Fortinet and Galp Energia go up and down completely randomly.

Pair Corralation between Fortinet and Galp Energia

Given the investment horizon of 90 days Fortinet is expected to generate 0.98 times more return on investment than Galp Energia. However, Fortinet is 1.02 times less risky than Galp Energia. It trades about 0.31 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about -0.2 per unit of risk. If you would invest  7,884  in Fortinet on September 4, 2024 and sell it today you would earn a total of  1,648  from holding Fortinet or generate 20.9% return on investment over 90 days.

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

Fortinet  vs.  Galp Energia SGPS

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. In spite of comparatively abnormal basic indicators, Fortinet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Galp Energia SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energia SGPS 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fortinet and Galp Energia

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

The idea behind Fortinet and Galp Energia SGPS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.