Correlation Between GE Aerospace and Fortinet

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

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

Diversification Opportunities for GE Aerospace and Fortinet

0.67

Correlation Coefficient

GE Aerospace  Fortinet

Poor diversification

The 3 months correlation between GE Aerospace and Fortinet is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and GE Aerospace 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 GE Aerospace are associated (or correlated) with Fortinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortinet has no effect on the direction of GE Aerospace i.e., GE Aerospace and Fortinet go up and down completely randomly.

Pair Corralation between GE Aerospace and Fortinet

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.98 times more return on investment than Fortinet. However, GE Aerospace is 1.02 times less risky than Fortinet. It trades about 0.17 of its potential returns per unit of risk. Fortinet is currently generating about 0.02 per unit of risk. If you would invest  16,779  in GE Aerospace on December 30, 2024 and sell it today you would earn a total of  3,209  from holding GE Aerospace or generate 19.13% return on investment over 90 days.

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

GE Aerospace  vs.  Fortinet

GE Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fortinet

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fortinet is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GE Aerospace and Fortinet

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

The idea behind GE Aerospace and Fortinet 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.