Correlation Between Forestar and Redfin Corp
Can any of the company-specific risk be diversified away by investing in both Forestar and Redfin Corp 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 Redfin Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forestar Group and Redfin Corp, you can compare the effects of market volatilities on Forestar and Redfin Corp 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 Redfin Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forestar and Redfin Corp.
Diversification Opportunities for Forestar and Redfin Corp
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Forestar and Redfin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Redfin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redfin Corp 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 Redfin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redfin Corp has no effect on the direction of Forestar i.e., Forestar and Redfin Corp go up and down completely randomly.
Pair Corralation between Forestar and Redfin Corp
Considering the 90-day investment horizon Forestar Group is expected to generate 0.69 times more return on investment than Redfin Corp. However, Forestar Group is 1.46 times less risky than Redfin Corp. It trades about 0.12 of its potential returns per unit of risk. Redfin Corp is currently generating about -0.19 per unit of risk. If you would invest 2,581 in Forestar Group on October 23, 2024 and sell it today you would earn a total of 98.00 from holding Forestar Group or generate 3.8% 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. Redfin Corp
Performance |
| Timeline |
| Forestar Group |
| Redfin Corp |
Forestar and Redfin Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forestar and Redfin Corp
The main advantage of trading using opposite Forestar and Redfin Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forestar position performs unexpectedly, Redfin Corp 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 Redfin Corp will offset losses from the drop in Redfin Corp's long position.| Forestar vs. American Realty Investors | Forestar vs. Landsea Homes Corp | Forestar vs. Five Point Holdings | Forestar vs. AMREP |
| Redfin Corp vs. Offerpad Solutions | Redfin Corp vs. eXp World Holdings | Redfin Corp vs. Ohmyhome Limited Ordinary | Redfin Corp vs. Real Brokerage |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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