Correlation Between Fortinet and Topaz

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

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

Diversification Opportunities for Fortinet and Topaz

0.36

Correlation Coefficient

Fortinet  Topaz

Weak diversification

The 3 months correlation between Fortinet and Topaz is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Topaz Solar Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Solar Farms 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 Topaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Solar Farms has no effect on the direction of Fortinet i.e., Fortinet and Topaz go up and down completely randomly.

Pair Corralation between Fortinet and Topaz

Given the investment horizon of 90 days Fortinet is expected to generate 4.15 times more return on investment than Topaz. However, Fortinet is 4.15 times more volatile than Topaz Solar Farms. It trades about 0.21 of its potential returns per unit of risk. Topaz Solar Farms is currently generating about -0.19 per unit of risk. If you would invest  7,501  in Fortinet on September 13, 2024 and sell it today you would earn a total of  2,303  from holding Fortinet or generate 30.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.62%
Values	Daily Returns

Fortinet  vs.  Topaz Solar Farms

Fortinet

Risk-Adjusted Performance

16 of 100

Solid

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

Topaz Solar Farms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topaz Solar Farms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Topaz is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fortinet and Topaz

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

The idea behind Fortinet and Topaz Solar Farms 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.