Correlation Between Fortinet and Kansai Electric

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

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

Diversification Opportunities for Fortinet and Kansai Electric

-0.77

Correlation Coefficient

Fortinet  Kansai Electric

Pay attention - limited upside

The 3 months correlation between Fortinet and Kansai is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Kansai Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansai Electric Power 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 Kansai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansai Electric Power has no effect on the direction of Fortinet i.e., Fortinet and Kansai Electric go up and down completely randomly.

Pair Corralation between Fortinet and Kansai Electric

Given the investment horizon of 90 days Fortinet is expected to generate 0.46 times more return on investment than Kansai Electric. However, Fortinet is 2.2 times less risky than Kansai Electric. It trades about 0.17 of its potential returns per unit of risk. Kansai Electric Power is currently generating about -0.09 per unit of risk. If you would invest  7,687  in Fortinet on September 4, 2024 and sell it today you would earn a total of  1,845  from holding Fortinet or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Fortinet  vs.  Kansai Electric Power

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.

Kansai Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kansai Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fortinet and Kansai Electric

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

The idea behind Fortinet and Kansai Electric Power 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.