Correlation Between AMREP and Forestar

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

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

Diversification Opportunities for AMREP and Forestar

-0.18

Correlation Coefficient

AMREP  Forestar

Good diversification

The 3 months correlation between AMREP and Forestar is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding AMREP and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and AMREP 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 AMREP are associated (or correlated) with Forestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forestar Group has no effect on the direction of AMREP i.e., AMREP and Forestar go up and down completely randomly.

Pair Corralation between AMREP and Forestar

Considering the 90-day investment horizon AMREP is expected to generate 2.31 times more return on investment than Forestar. However, AMREP is 2.31 times more volatile than Forestar Group. It trades about 0.21 of its potential returns per unit of risk. Forestar Group is currently generating about 0.01 per unit of risk. If you would invest  2,210  in AMREP on September 1, 2024 and sell it today you would earn a total of  1,394  from holding AMREP or generate 63.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AMREP  vs.  Forestar Group

AMREP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AMREP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AMREP reported solid returns over the last few months and may actually be approaching a breakup point.

Forestar Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forestar Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Forestar is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AMREP and Forestar

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

The idea behind AMREP and Forestar Group 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.