Correlation Between Alpha One and Forum Merger

Can any of the company-specific risk be diversified away by investing in both Alpha One and Forum Merger 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 Alpha One and Forum Merger into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alpha One and Forum Merger IV, you can compare the effects of market volatilities on Alpha One and Forum Merger 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 Alpha One with a short position of Forum Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha One and Forum Merger.

Diversification Opportunities for Alpha One and Forum Merger

-0.38

Correlation Coefficient

Alpha One  Forum Merger

Very good diversification

The 3 months correlation between Alpha and Forum is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alpha One and Forum Merger IV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Merger IV and Alpha One 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 Alpha One are associated (or correlated) with Forum Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Merger IV has no effect on the direction of Alpha One i.e., Alpha One and Forum Merger go up and down completely randomly.

Pair Corralation between Alpha One and Forum Merger

Given the investment horizon of 90 days Alpha One is expected to generate 34.03 times more return on investment than Forum Merger. However, Alpha One is 34.03 times more volatile than Forum Merger IV. It trades about 0.01 of its potential returns per unit of risk. Forum Merger IV is currently generating about 0.13 per unit of risk. If you would invest  251.00  in Alpha One on September 30, 2024 and sell it today you would lose (97.00) from holding Alpha One or give up 38.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.1%
Values	Daily Returns

Alpha One  vs.  Forum Merger IV

Alpha One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Forum Merger IV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forum Merger IV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Forum Merger is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alpha One and Forum Merger

The main advantage of trading using opposite Alpha One and Forum Merger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha One position performs unexpectedly, Forum Merger 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 Merger will offset losses from the drop in Forum Merger's long position.

The idea behind Alpha One and Forum Merger IV 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.