Correlation Between Snap and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Forum Energy Metals, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Forum Energy.
Diversification Opportunities for Snap and Forum Energy
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Snap and Forum is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals and Snap 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 Snap Inc 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 Metals has no effect on the direction of Snap i.e., Snap and Forum Energy go up and down completely randomly.
Pair Corralation between Snap and Forum Energy
Given the investment horizon of 90 days Snap is expected to generate 1.96 times less return on investment than Forum Energy. But when comparing it to its historical volatility, Snap Inc is 1.9 times less risky than Forum Energy. It trades about 0.03 of its potential returns per unit of risk. Forum Energy Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Forum Energy Metals on August 29, 2024 and sell it today you would lose (1.25) from holding Forum Energy Metals or give up 15.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Forum Energy Metals
Performance |
| Timeline |
| Snap Inc |
| Forum Energy Metals |
Snap and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Forum Energy
The main advantage of trading using opposite Snap and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Forum Energy Metals 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.| Forum Energy vs. Petroleo Brasileiro Petrobras | Forum Energy vs. Equinor ASA ADR | Forum Energy vs. Eni SpA ADR | Forum Energy vs. YPF Sociedad Anonima |
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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