Correlation Between Fortive Corp and Wrap Technologies

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

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

Diversification Opportunities for Fortive Corp and Wrap Technologies

0.41

Correlation Coefficient

Fortive Corp  Wrap Technologies

Very weak diversification

The 3 months correlation between Fortive and Wrap is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fortive Corp and Wrap Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wrap Technologies 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 Wrap Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wrap Technologies has no effect on the direction of Fortive Corp i.e., Fortive Corp and Wrap Technologies go up and down completely randomly.

Pair Corralation between Fortive Corp and Wrap Technologies

Considering the 90-day investment horizon Fortive Corp is expected to generate 20.13 times less return on investment than Wrap Technologies. But when comparing it to its historical volatility, Fortive Corp is 4.42 times less risky than Wrap Technologies. It trades about 0.03 of its potential returns per unit of risk. Wrap Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Wrap Technologies on December 19, 2024 and sell it today you would earn a total of  62.00  from holding Wrap Technologies or generate 39.49% return on investment over 90 days.

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

Fortive Corp  vs.  Wrap Technologies

Fortive Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 2 (%) 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.

Wrap Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wrap Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Wrap Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortive Corp and Wrap Technologies

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

The idea behind Fortive Corp and Wrap Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.