Correlation Between Foraco International and Entree Resources
Can any of the company-specific risk be diversified away by investing in both Foraco International and Entree Resources 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 Foraco International and Entree Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foraco International SA and Entree Resources, you can compare the effects of market volatilities on Foraco International and Entree Resources 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 Foraco International with a short position of Entree Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foraco International and Entree Resources.
Diversification Opportunities for Foraco International and Entree Resources
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Foraco and Entree is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and Entree Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entree Resources and Foraco International 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 Foraco International SA are associated (or correlated) with Entree Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entree Resources has no effect on the direction of Foraco International i.e., Foraco International and Entree Resources go up and down completely randomly.
Pair Corralation between Foraco International and Entree Resources
Assuming the 90 days trading horizon Foraco International is expected to generate 2.73 times less return on investment than Entree Resources. But when comparing it to its historical volatility, Foraco International SA is 1.14 times less risky than Entree Resources. It trades about 0.07 of its potential returns per unit of risk. Entree Resources is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 205.00 in Entree Resources on September 19, 2024 and sell it today you would earn a total of 25.00 from holding Entree Resources or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Foraco International SA vs. Entree Resources
Performance |
| Timeline |
| Foraco International |
| Entree Resources |
Foraco International and Entree Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foraco International and Entree Resources
The main advantage of trading using opposite Foraco International and Entree Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foraco International position performs unexpectedly, Entree Resources 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 Entree Resources will offset losses from the drop in Entree Resources' long position.| Foraco International vs. Orbit Garant Drilling | Foraco International vs. Geodrill Limited | Foraco International vs. Mccoy Global | Foraco International vs. Bri Chem Corp |
| Entree Resources vs. Foraco International SA | Entree Resources vs. Geodrill Limited | Entree Resources vs. Major Drilling Group | Entree Resources vs. Bri Chem Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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