Correlation Between Boss Resources and Forum Energy

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Can any of the company-specific risk be diversified away by investing in both Boss Resources and Forum Energy 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 Boss Resources and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boss Resources and Forum Energy Metals, you can compare the effects of market volatilities on Boss Resources and Forum Energy 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 Boss Resources with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boss Resources and Forum Energy.

Diversification Opportunities for Boss Resources and Forum Energy

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Boss and Forum is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boss Resources and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals and Boss Resources 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 Boss Resources are associated (or correlated) with Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Boss Resources i.e., Boss Resources and Forum Energy go up and down completely randomly.

Pair Corralation between Boss Resources and Forum Energy

Assuming the 90 days horizon Boss Resources is expected to generate 0.28 times more return on investment than Forum Energy. However, Boss Resources is 3.62 times less risky than Forum Energy. It trades about -0.24 of its potential returns per unit of risk. Forum Energy Metals is currently generating about -0.1 per unit of risk. If you would invest  209.00  in Boss Resources on September 4, 2024 and sell it today you would lose (30.00) from holding Boss Resources or give up 14.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Boss Resources  vs.  Forum Energy Metals

 Performance 
       Timeline  
Boss Resources 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Boss Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Boss Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Forum Energy Metals 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Forum Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boss Resources and Forum Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boss Resources and Forum Energy

The main advantage of trading using opposite Boss Resources and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boss Resources position performs unexpectedly, Forum Energy 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 Forum Energy will offset losses from the drop in Forum Energy's long position.
The idea behind Boss Resources and Forum Energy Metals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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