Correlation Between Forstrong Global and Canadian Utilities

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

Diversification Opportunities for Forstrong Global and Canadian Utilities

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Forstrong and Canadian is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and Forstrong Global 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 Forstrong Global Income are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Forstrong Global i.e., Forstrong Global and Canadian Utilities go up and down completely randomly.

Pair Corralation between Forstrong Global and Canadian Utilities

Assuming the 90 days trading horizon Forstrong Global is expected to generate 1.2 times less return on investment than Canadian Utilities. But when comparing it to its historical volatility, Forstrong Global Income is 2.54 times less risky than Canadian Utilities. It trades about 0.13 of its potential returns per unit of risk. Canadian Utilities Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,068  in Canadian Utilities Ltd on September 1, 2024 and sell it today you would earn a total of  147.00  from holding Canadian Utilities Ltd or generate 7.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.21%
ValuesDaily Returns

Forstrong Global Income  vs.  Canadian Utilities Ltd

 Performance 
       Timeline  
Forstrong Global Income 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Forstrong Global Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Forstrong Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Canadian Utilities 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Canadian Utilities Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Forstrong Global and Canadian Utilities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Forstrong Global and Canadian Utilities

The main advantage of trading using opposite Forstrong Global and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forstrong Global position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.
The idea behind Forstrong Global Income and Canadian Utilities Ltd 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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