Correlation Between Alamo and Forestar
Can any of the company-specific risk be diversified away by investing in both Alamo and Forestar 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 Alamo and Forestar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alamo Group and Forestar Group, you can compare the effects of market volatilities on Alamo and Forestar 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 Alamo with a short position of Forestar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alamo and Forestar.
Diversification Opportunities for Alamo and Forestar
Very good diversification
The 3 months correlation between Alamo and Forestar is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and Alamo 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 Alamo Group are associated (or correlated) with Forestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forestar Group has no effect on the direction of Alamo i.e., Alamo and Forestar go up and down completely randomly.
Pair Corralation between Alamo and Forestar
Considering the 90-day investment horizon Alamo Group is expected to generate 1.93 times more return on investment than Forestar. However, Alamo is 1.93 times more volatile than Forestar Group. It trades about 0.27 of its potential returns per unit of risk. Forestar Group is currently generating about -0.25 per unit of risk. If you would invest 16,880 in Alamo Group on August 24, 2024 and sell it today you would earn a total of 2,930 from holding Alamo Group or generate 17.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alamo Group vs. Forestar Group
Performance |
| Timeline |
| Alamo Group |
| Forestar Group |
Alamo and Forestar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alamo and Forestar
The main advantage of trading using opposite Alamo and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alamo position performs unexpectedly, Forestar 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 Forestar will offset losses from the drop in Forestar's long position.| Alamo vs. Hyster Yale Materials Handling | Alamo vs. Columbus McKinnon | Alamo vs. AGCO Corporation | Alamo vs. Titan International |
| Forestar vs. American Realty Investors | Forestar vs. Landsea Homes Corp | Forestar vs. Five Point Holdings | Forestar vs. AMREP |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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