Correlation Between Spectris Plc and Fortive Corp

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

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

Diversification Opportunities for Spectris Plc and Fortive Corp

-0.39

Correlation Coefficient

Spectris Plc  Fortive Corp

Very good diversification

The 3 months correlation between Spectris and Fortive is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Spectris plc and Fortive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive Corp and Spectris Plc 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 Spectris plc are associated (or correlated) with Fortive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortive Corp has no effect on the direction of Spectris Plc i.e., Spectris Plc and Fortive Corp go up and down completely randomly.

Pair Corralation between Spectris Plc and Fortive Corp

Assuming the 90 days horizon Spectris plc is expected to under-perform the Fortive Corp. In addition to that, Spectris Plc is 2.37 times more volatile than Fortive Corp. It trades about -0.09 of its total potential returns per unit of risk. Fortive Corp is currently generating about 0.13 per unit of volatility. If you would invest  7,154  in Fortive Corp on September 4, 2024 and sell it today you would earn a total of  742.00  from holding Fortive Corp or generate 10.37% return on investment over 90 days.

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

Spectris plc  vs.  Fortive Corp

Spectris plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectris plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fortive Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortive Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Fortive Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spectris Plc and Fortive Corp

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

The idea behind Spectris plc and Fortive 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.