Correlation Between Fortive Corp and MKS Instruments

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

By analyzing existing cross correlation between Fortive Corp and MKS Instruments, you can compare the effects of market volatilities on Fortive Corp and MKS Instruments 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 MKS Instruments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortive Corp and MKS Instruments.

Diversification Opportunities for Fortive Corp and MKS Instruments

0.52

Correlation Coefficient

Fortive Corp  MKS Instruments

Very weak diversification

The 3 months correlation between Fortive and MKS is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fortive Corp and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments 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 MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Fortive Corp i.e., Fortive Corp and MKS Instruments go up and down completely randomly.

Pair Corralation between Fortive Corp and MKS Instruments

Considering the 90-day investment horizon Fortive Corp is expected to generate 0.39 times more return on investment than MKS Instruments. However, Fortive Corp is 2.55 times less risky than MKS Instruments. It trades about 0.0 of its potential returns per unit of risk. MKS Instruments is currently generating about -0.09 per unit of risk. If you would invest  7,496  in Fortive Corp on December 28, 2024 and sell it today you would lose (37.00) from holding Fortive Corp or give up 0.49% of portfolio value over 90 days.

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

Fortive Corp  vs.  MKS Instruments

Fortive Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortive Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

MKS Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fortive Corp and MKS Instruments

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

The idea behind Fortive Corp and MKS Instruments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.