Correlation Between Fortis and Tidewater Renewables

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

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

Diversification Opportunities for Fortis and Tidewater Renewables

-0.73

Correlation Coefficient

Fortis  Tidewater Renewables

Pay attention - limited upside

The 3 months correlation between Fortis and Tidewater is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fortis Inc and Tidewater Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater Renewables 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 Tidewater Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater Renewables has no effect on the direction of Fortis i.e., Fortis and Tidewater Renewables go up and down completely randomly.

Pair Corralation between Fortis and Tidewater Renewables

Assuming the 90 days trading horizon Fortis Inc is expected to generate 0.22 times more return on investment than Tidewater Renewables. However, Fortis Inc is 4.52 times less risky than Tidewater Renewables. It trades about 0.04 of its potential returns per unit of risk. Tidewater Renewables is currently generating about -0.09 per unit of risk. If you would invest  5,073  in Fortis Inc on September 13, 2024 and sell it today you would earn a total of  1,026  from holding Fortis Inc or generate 20.22% return on investment over 90 days.

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

Fortis Inc  vs.  Tidewater Renewables

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.

Tidewater Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidewater Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Fortis and Tidewater Renewables

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

The idea behind Fortis Inc and Tidewater Renewables 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.