Correlation Between NYSE Composite and Forum Energy
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Forum Energy 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 NYSE Composite and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Forum Energy Technologies, you can compare the effects of market volatilities on NYSE Composite and Forum Energy 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 NYSE Composite with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Forum Energy.
Diversification Opportunities for NYSE Composite and Forum Energy
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Forum is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Forum Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Technologies and NYSE Composite 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 NYSE Composite are associated (or correlated) with Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Technologies has no effect on the direction of NYSE Composite i.e., NYSE Composite and Forum Energy go up and down completely randomly.
Pair Corralation between NYSE Composite and Forum Energy
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.87 times less return on investment than Forum Energy. But when comparing it to its historical volatility, NYSE Composite is 3.89 times less risky than Forum Energy. It trades about 0.24 of its potential returns per unit of risk. Forum Energy Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,432 in Forum Energy Technologies on August 27, 2024 and sell it today you would earn a total of 84.00 from holding Forum Energy Technologies or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Forum Energy Technologies
Performance |
| Timeline |
NYSE Composite and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Forum Energy Technologies
Pair trading matchups for Forum Energy
Pair Trading with NYSE Composite and Forum Energy
The main advantage of trading using opposite NYSE Composite and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Forum Energy 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 Forum Energy will offset losses from the drop in Forum Energy's long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Forum Energy vs. Natural Gas Services | Forum Energy vs. Enerflex | Forum Energy vs. Now Inc | Forum Energy vs. Newpark Resources |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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