Correlation Between Fortive Corp and Hexagon AB

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

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

Diversification Opportunities for Fortive Corp and Hexagon AB

0.05

Correlation Coefficient

Fortive Corp  Hexagon AB

Significant diversification

The 3 months correlation between Fortive and Hexagon is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Fortive Corp and Hexagon AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon AB ADR and Fortive Corp 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 Fortive Corp are associated (or correlated) with Hexagon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon AB ADR has no effect on the direction of Fortive Corp i.e., Fortive Corp and Hexagon AB go up and down completely randomly.

Pair Corralation between Fortive Corp and Hexagon AB

Considering the 90-day investment horizon Fortive Corp is expected to generate 4.94 times less return on investment than Hexagon AB. But when comparing it to its historical volatility, Fortive Corp is 2.58 times less risky than Hexagon AB. It trades about 0.15 of its potential returns per unit of risk. Hexagon AB ADR is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  847.00  in Hexagon AB ADR on September 16, 2024 and sell it today you would earn a total of  124.00  from holding Hexagon AB ADR or generate 14.64% return on investment over 90 days.

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

Fortive Corp  vs.  Hexagon AB ADR

Fortive Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fortive Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hexagon AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hexagon AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Hexagon AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fortive Corp and Hexagon AB

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

The idea behind Fortive Corp and Hexagon AB ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.