Correlation Between Fortive Corp and Sono Tek

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

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

Diversification Opportunities for Fortive Corp and Sono Tek

-0.04

Correlation Coefficient

Fortive Corp  Sono Tek

Good diversification

The 3 months correlation between Fortive and Sono is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Fortive Corp and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp 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 Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Fortive Corp i.e., Fortive Corp and Sono Tek go up and down completely randomly.

Pair Corralation between Fortive Corp and Sono Tek

Considering the 90-day investment horizon Fortive Corp is expected to generate 0.47 times more return on investment than Sono Tek. However, Fortive Corp is 2.15 times less risky than Sono Tek. It trades about 0.0 of its potential returns per unit of risk. Sono Tek Corp is currently generating about -0.06 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 Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Fortive Corp  vs.  Sono Tek Corp

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.

Sono Tek Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sono Tek Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Fortive Corp and Sono Tek

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

The idea behind Fortive Corp and Sono Tek Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.