Correlation Between Bri Chem and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Bri Chem 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 Bri Chem and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bri Chem Corp and Forum Energy Metals, you can compare the effects of market volatilities on Bri Chem 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 Bri Chem with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri Chem and Forum Energy.
Diversification Opportunities for Bri Chem and Forum Energy
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bri and Forum is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp 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 Bri Chem 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 Bri Chem Corp 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 Bri Chem i.e., Bri Chem and Forum Energy go up and down completely randomly.
Pair Corralation between Bri Chem and Forum Energy
Assuming the 90 days trading horizon Bri Chem Corp is expected to generate 1.07 times more return on investment than Forum Energy. However, Bri Chem is 1.07 times more volatile than Forum Energy Metals. It trades about 0.07 of its potential returns per unit of risk. Forum Energy Metals is currently generating about -0.06 per unit of risk. If you would invest 17.00 in Bri Chem Corp on September 2, 2024 and sell it today you would earn a total of 6.00 from holding Bri Chem Corp or generate 35.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bri Chem Corp vs. Forum Energy Metals
Performance |
| Timeline |
| Bri Chem Corp |
| Forum Energy Metals |
Bri Chem and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bri Chem and Forum Energy
The main advantage of trading using opposite Bri Chem and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bri Chem 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 Bri Chem Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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