Correlation Between Trimble and Fortive

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

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

Diversification Opportunities for Trimble and Fortive

0.84

Correlation Coefficient

Trimble  Fortive

Very poor diversification

The 3 months correlation between Trimble and Fortive is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Fortive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive and Trimble 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 Trimble are associated (or correlated) with Fortive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortive has no effect on the direction of Trimble i.e., Trimble and Fortive go up and down completely randomly.

Pair Corralation between Trimble and Fortive

Assuming the 90 days horizon Trimble is expected to under-perform the Fortive. In addition to that, Trimble is 1.37 times more volatile than Fortive. It trades about -0.05 of its total potential returns per unit of risk. Fortive is currently generating about -0.04 per unit of volatility. If you would invest  7,199  in Fortive on December 29, 2024 and sell it today you would lose (251.00) from holding Fortive or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Trimble  vs.  Fortive

Trimble

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trimble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Trimble is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fortive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fortive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Trimble and Fortive

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

The idea behind Trimble and Fortive 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.