Correlation Between Borr Drilling and Forum Energy

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

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

Diversification Opportunities for Borr Drilling and Forum Energy

0.27

Correlation Coefficient

Borr Drilling  Forum Energy

Modest diversification

The 3 months correlation between Borr and Forum is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling 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 Borr Drilling 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 Borr Drilling 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 Borr Drilling i.e., Borr Drilling and Forum Energy go up and down completely randomly.

Pair Corralation between Borr Drilling and Forum Energy

Given the investment horizon of 90 days Borr Drilling is expected to generate 7.34 times less return on investment than Forum Energy. But when comparing it to its historical volatility, Borr Drilling is 2.35 times less risky than Forum Energy. It trades about 0.01 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  7.00  in Forum Energy Metals on September 12, 2024 and sell it today you would lose (2.40) from holding Forum Energy Metals or give up 34.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Borr Drilling  vs.  Forum Energy Metals

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Forum Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forum Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Forum Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Borr Drilling and Forum Energy

The main advantage of trading using opposite Borr Drilling and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Borr Drilling 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 Borr Drilling 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.