Correlation Between Foraco International and TWC Enterprises

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

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

Diversification Opportunities for Foraco International and TWC Enterprises

0.08

Correlation Coefficient

Foraco International  TWC Enterprises

Significant diversification

The 3 months correlation between Foraco and TWC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and TWC Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWC Enterprises and Foraco International 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 Foraco International SA are associated (or correlated) with TWC Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWC Enterprises has no effect on the direction of Foraco International i.e., Foraco International and TWC Enterprises go up and down completely randomly.

Pair Corralation between Foraco International and TWC Enterprises

Assuming the 90 days trading horizon Foraco International SA is expected to generate 2.08 times more return on investment than TWC Enterprises. However, Foraco International is 2.08 times more volatile than TWC Enterprises. It trades about 0.04 of its potential returns per unit of risk. TWC Enterprises is currently generating about 0.01 per unit of risk. If you would invest  173.00  in Foraco International SA on September 26, 2024 and sell it today you would earn a total of  58.00  from holding Foraco International SA or generate 33.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Foraco International SA  vs.  TWC Enterprises

Foraco International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TWC Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TWC Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, TWC Enterprises is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Foraco International and TWC Enterprises

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

The idea behind Foraco International SA and TWC Enterprises 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.