Correlation Between Forstrong Global and North American
Can any of the company-specific risk be diversified away by investing in both Forstrong Global and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Forstrong Global and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forstrong Global and North American.
Diversification Opportunities for Forstrong Global and North American
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Forstrong and North is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Forstrong Global i.e., Forstrong Global and North American go up and down completely randomly.
Pair Corralation between Forstrong Global and North American
Assuming the 90 days trading horizon Forstrong Global Income is expected to under-perform the North American. In addition to that, Forstrong Global is 1.39 times more volatile than North American Financial. It trades about -0.08 of its total potential returns per unit of risk. North American Financial is currently generating about 0.48 per unit of volatility. If you would invest 1,033 in North American Financial on August 31, 2024 and sell it today you would earn a total of 28.00 from holding North American Financial or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forstrong Global Income vs. North American Financial
Performance |
| Timeline |
| Forstrong Global Income |
| North American Financial |
Forstrong Global and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forstrong Global and North American
The main advantage of trading using opposite Forstrong Global and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forstrong Global position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Forstrong Global vs. Forstrong Global Ex North | Forstrong Global vs. Forstrong Global Growth | Forstrong Global vs. Forstrong Emerging Markets | Forstrong Global vs. NBI High Yield |
| North American vs. Financial 15 Split | North American vs. Dividend 15 Split | North American vs. Dividend Growth Split | North American vs. Dividend 15 Split |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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