Correlation Between Trimble and Fortive Corp

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

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

Diversification Opportunities for Trimble and Fortive Corp

0.76

Correlation Coefficient

Trimble  Fortive Corp

Poor diversification

The 3 months correlation between Trimble and Fortive is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Fortive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive Corp 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 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 Trimble i.e., Trimble and Fortive Corp go up and down completely randomly.

Pair Corralation between Trimble and Fortive Corp

Given the investment horizon of 90 days Trimble is expected to under-perform the Fortive Corp. In addition to that, Trimble is 1.35 times more volatile than Fortive Corp. It trades about -0.03 of its total potential returns per unit of risk. Fortive Corp is currently generating about 0.0 per unit of volatility. If you would invest  7,496  in Fortive Corp on December 29, 2024 and sell it today you would lose (37.00) from holding Fortive Corp or give up 0.49% of portfolio value over 90 days.

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

Trimble  vs.  Fortive Corp

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 somewhat strong primary indicators, Trimble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fortive Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortive Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Trimble and Fortive Corp

The main advantage of trading using opposite Trimble and Fortive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble 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 Trimble 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.