Correlation Between Forstrong Global and Power Financial
Can any of the company-specific risk be diversified away by investing in both Forstrong Global and Power Financial 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 Power Financial 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 Power Financial Corp, you can compare the effects of market volatilities on Forstrong Global and Power Financial 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 Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forstrong Global and Power Financial.
Diversification Opportunities for Forstrong Global and Power Financial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Forstrong and Power is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial Corp 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 Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of Forstrong Global i.e., Forstrong Global and Power Financial go up and down completely randomly.
Pair Corralation between Forstrong Global and Power Financial
Assuming the 90 days trading horizon Forstrong Global is expected to generate 1.68 times less return on investment than Power Financial. But when comparing it to its historical volatility, Forstrong Global Income is 2.3 times less risky than Power Financial. It trades about 0.13 of its potential returns per unit of risk. Power Financial Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,766 in Power Financial Corp on August 29, 2024 and sell it today you would earn a total of 307.00 from holding Power Financial Corp or generate 17.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forstrong Global Income vs. Power Financial Corp
Performance |
| Timeline |
| Forstrong Global Income |
| Power Financial Corp |
Forstrong Global and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forstrong Global and Power Financial
The main advantage of trading using opposite Forstrong Global and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forstrong Global position performs unexpectedly, Power Financial 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 Power Financial will offset losses from the drop in Power Financial'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 |
| Power Financial vs. Forstrong Global Income | Power Financial vs. BMO Aggregate Bond | Power Financial vs. Terreno Resources Corp | Power Financial vs. iShares Canadian HYBrid |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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