Correlation Between Packaging Corp and Fortive Corp
Can any of the company-specific risk be diversified away by investing in both Packaging Corp 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 Packaging Corp and Fortive Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packaging Corp of and Fortive Corp, you can compare the effects of market volatilities on Packaging Corp 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 Packaging Corp with a short position of Fortive Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packaging Corp and Fortive Corp.
Diversification Opportunities for Packaging Corp and Fortive Corp
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Packaging and Fortive is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of and Fortive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive Corp and Packaging Corp 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 Packaging Corp of 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 Packaging Corp i.e., Packaging Corp and Fortive Corp go up and down completely randomly.
Pair Corralation between Packaging Corp and Fortive Corp
Considering the 90-day investment horizon Packaging Corp of is expected to generate 0.93 times more return on investment than Fortive Corp. However, Packaging Corp of is 1.08 times less risky than Fortive Corp. It trades about 0.15 of its potential returns per unit of risk. Fortive Corp is currently generating about 0.04 per unit of risk. If you would invest 12,507 in Packaging Corp of on August 31, 2024 and sell it today you would earn a total of 12,378 from holding Packaging Corp of or generate 98.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Packaging Corp of vs. Fortive Corp
Performance |
| Timeline |
| Packaging Corp |
| Fortive Corp |
Packaging Corp and Fortive Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packaging Corp and Fortive Corp
The main advantage of trading using opposite Packaging Corp and Fortive Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packaging Corp 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 Packaging Corp of 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.| Fortive Corp vs. Vishay Precision Group | Fortive Corp vs. Sensata Technologies Holding | Fortive Corp vs. Badger Meter | Fortive Corp vs. Trimble |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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