Correlation Between Forestar and AMREP
Can any of the company-specific risk be diversified away by investing in both Forestar and AMREP 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 Forestar and AMREP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forestar Group and AMREP, you can compare the effects of market volatilities on Forestar and AMREP 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 Forestar with a short position of AMREP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forestar and AMREP.
Diversification Opportunities for Forestar and AMREP
Very poor diversification
The 3 months correlation between Forestar and AMREP is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP and Forestar 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 Forestar Group are associated (or correlated) with AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of Forestar i.e., Forestar and AMREP go up and down completely randomly.
Pair Corralation between Forestar and AMREP
Considering the 90-day investment horizon Forestar is expected to generate 2.48 times less return on investment than AMREP. But when comparing it to its historical volatility, Forestar Group is 1.27 times less risky than AMREP. It trades about 0.02 of its potential returns per unit of risk. AMREP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,482 in AMREP on January 15, 2025 and sell it today you would earn a total of 610.00 from holding AMREP or generate 41.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forestar Group vs. AMREP
Performance |
| Timeline |
| Forestar Group |
| AMREP |
Forestar and AMREP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forestar and AMREP
The main advantage of trading using opposite Forestar and AMREP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forestar position performs unexpectedly, AMREP 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 AMREP will offset losses from the drop in AMREP's long position.| Forestar vs. American Realty Investors | Forestar vs. Landsea Homes Corp | Forestar vs. Five Point Holdings | Forestar vs. AMREP |
| AMREP vs. Landsea Homes Corp | AMREP vs. Forestar Group | AMREP vs. Five Point Holdings | AMREP vs. American Realty Investors |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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