Correlation Between West Mining and Forum Energy
Can any of the company-specific risk be diversified away by investing in both West Mining 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 West Mining and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Mining Corp and Forum Energy Metals, you can compare the effects of market volatilities on West Mining 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 West Mining with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Mining and Forum Energy.
Diversification Opportunities for West Mining and Forum Energy
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between West and Forum is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding West Mining Corp 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 West Mining 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 West Mining Corp 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 West Mining i.e., West Mining and Forum Energy go up and down completely randomly.
Pair Corralation between West Mining and Forum Energy
Assuming the 90 days horizon West Mining Corp is expected to under-perform the Forum Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, West Mining Corp is 1.36 times less risky than Forum Energy. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Forum Energy Metals is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Forum Energy Metals on September 1, 2024 and sell it today you would lose (1.40) from holding Forum Energy Metals or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Mining Corp vs. Forum Energy Metals
Performance |
| Timeline |
| West Mining Corp |
| Forum Energy Metals |
West Mining and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Mining and Forum Energy
The main advantage of trading using opposite West Mining and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Mining 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.| West Mining vs. ATT Inc | West Mining vs. Merck Company | West Mining vs. Walt Disney | West Mining vs. Caterpillar |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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