Correlation Between STEP Energy and Forum Energy
Can any of the company-specific risk be diversified away by investing in both STEP Energy 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 STEP Energy and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEP Energy Services and Forum Energy Technologies, you can compare the effects of market volatilities on STEP Energy 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 STEP Energy with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEP Energy and Forum Energy.
Diversification Opportunities for STEP Energy and Forum Energy
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STEP and Forum is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding STEP Energy Services 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 STEP 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 STEP Energy Services 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 STEP Energy i.e., STEP Energy and Forum Energy go up and down completely randomly.
Pair Corralation between STEP Energy and Forum Energy
Assuming the 90 days horizon STEP Energy Services is expected to under-perform the Forum Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, STEP Energy Services is 1.75 times less risky than Forum Energy. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Forum Energy Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,791 in Forum Energy Technologies on November 28, 2024 and sell it today you would earn a total of 60.50 from holding Forum Energy Technologies or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STEP Energy Services vs. Forum Energy Technologies
Performance |
| Timeline |
| STEP Energy Services |
| Forum Energy Technologies |
STEP Energy and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STEP Energy and Forum Energy
The main advantage of trading using opposite STEP Energy and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEP Energy 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.| STEP Energy vs. Sky Petroleum | STEP Energy vs. FEC Resources | STEP Energy vs. Savoy Energy Corp | STEP Energy vs. Spindletop OG |
| Forum Energy vs. Natural Gas Services | Forum Energy vs. Enerflex | Forum Energy vs. Now Inc | Forum Energy vs. Bristow Group |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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