Correlation Between Equifax and Forrester Research

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

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

Diversification Opportunities for Equifax and Forrester Research

0.63

Correlation Coefficient

Equifax  Forrester Research

Poor diversification

The 3 months correlation between Equifax and Forrester is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Forrester Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forrester Research and Equifax 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 Equifax are associated (or correlated) with Forrester Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forrester Research has no effect on the direction of Equifax i.e., Equifax and Forrester Research go up and down completely randomly.

Pair Corralation between Equifax and Forrester Research

Considering the 90-day investment horizon Equifax is expected to under-perform the Forrester Research. But the stock apears to be less risky and, when comparing its historical volatility, Equifax is 1.49 times less risky than Forrester Research. The stock trades about -0.14 of its potential returns per unit of risk. The Forrester Research is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,839  in Forrester Research on September 3, 2024 and sell it today you would lose (114.00) from holding Forrester Research or give up 6.2% of portfolio value over 90 days.

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

Equifax  vs.  Forrester Research

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Forrester Research

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forrester Research has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Forrester Research is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Equifax and Forrester Research

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

The idea behind Equifax and Forrester Research 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.