Correlation Between Block and Fortinet

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

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

Diversification Opportunities for Block and Fortinet

0.94

Correlation Coefficient

Block  Fortinet

Almost no diversification

The 3 months correlation between Block and Fortinet is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet and Block 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 Block Inc 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 Block i.e., Block and Fortinet go up and down completely randomly.

Pair Corralation between Block and Fortinet

Allowing for the 90-day total investment horizon Block Inc is expected to generate 1.67 times more return on investment than Fortinet. However, Block is 1.67 times more volatile than Fortinet. It trades about 0.19 of its potential returns per unit of risk. Fortinet is currently generating about 0.01 per unit of risk. If you would invest  8,340  in Block Inc on September 12, 2024 and sell it today you would earn a total of  1,064  from holding Block Inc or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Block Inc  vs.  Fortinet

Block Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Block reported solid returns over the last few months and may actually be approaching a breakup point.

Fortinet

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fortinet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Block and Fortinet

The main advantage of trading using opposite Block and Fortinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block 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 Block Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.