Correlation Between Forum Energy and Bri Chem
Can any of the company-specific risk be diversified away by investing in both Forum Energy and Bri Chem 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 Forum Energy and Bri Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forum Energy Metals and Bri Chem Corp, you can compare the effects of market volatilities on Forum Energy and Bri Chem 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 Forum Energy with a short position of Bri Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Bri Chem.
Diversification Opportunities for Forum Energy and Bri Chem
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Forum and Bri is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Metals and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and Forum Energy 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 Forum Energy Metals are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of Forum Energy i.e., Forum Energy and Bri Chem go up and down completely randomly.
Pair Corralation between Forum Energy and Bri Chem
Assuming the 90 days horizon Forum Energy Metals is expected to generate 1.29 times more return on investment than Bri Chem. However, Forum Energy is 1.29 times more volatile than Bri Chem Corp. It trades about 0.01 of its potential returns per unit of risk. Bri Chem Corp is currently generating about -0.03 per unit of risk. If you would invest 11.00 in Forum Energy Metals on September 2, 2024 and sell it today you would lose (4.00) from holding Forum Energy Metals or give up 36.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forum Energy Metals vs. Bri Chem Corp
Performance |
| Timeline |
| Forum Energy Metals |
| Bri Chem Corp |
Forum Energy and Bri Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forum Energy and Bri Chem
The main advantage of trading using opposite Forum Energy and Bri Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forum Energy position performs unexpectedly, Bri Chem 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 Bri Chem will offset losses from the drop in Bri Chem's long position.The idea behind Forum Energy Metals and Bri Chem Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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