Correlation Between Fortis and ATCO

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

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

Diversification Opportunities for Fortis and ATCO

0.66

Correlation Coefficient

Fortis  ATCO

Poor diversification

The 3 months correlation between Fortis and ATCO is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fortis Inc and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO and Fortis 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 Fortis Inc are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Fortis i.e., Fortis and ATCO go up and down completely randomly.

Pair Corralation between Fortis and ATCO

Assuming the 90 days trading horizon Fortis Inc is expected to generate 0.86 times more return on investment than ATCO. However, Fortis Inc is 1.16 times less risky than ATCO. It trades about -0.01 of its potential returns per unit of risk. ATCO is currently generating about -0.06 per unit of risk. If you would invest  6,037  in Fortis Inc on September 27, 2024 and sell it today you would lose (32.00) from holding Fortis Inc or give up 0.53% of portfolio value over 90 days.

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

Fortis Inc  vs.  ATCO

Fortis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fortis is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ATCO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ATCO is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fortis and ATCO

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

The idea behind Fortis Inc and ATCO 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.