Correlation Between Forum Energy and Huntsman Exploration

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

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

Diversification Opportunities for Forum Energy and Huntsman Exploration

0.81

Correlation Coefficient

Forum Energy  Huntsman Exploration

Very poor diversification

The 3 months correlation between Forum and Huntsman is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Metals and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration and Forum Energy 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 Forum Energy Metals are associated (or correlated) with Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Forum Energy i.e., Forum Energy and Huntsman Exploration go up and down completely randomly.

Pair Corralation between Forum Energy and Huntsman Exploration

Assuming the 90 days horizon Forum Energy Metals is not expected to generate positive returns. However, Forum Energy Metals is 2.19 times less risky than Huntsman Exploration. It waists most of its returns potential to compensate for thr risk taken. Huntsman Exploration is generating about 0.27 per unit of risk. If you would invest  2.00  in Huntsman Exploration on October 26, 2024 and sell it today you would earn a total of  2.90  from holding Huntsman Exploration or generate 145.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Forum Energy Metals  vs.  Huntsman Exploration

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Huntsman Exploration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Huntsman Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Huntsman Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forum Energy and Huntsman Exploration

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

The idea behind Forum Energy Metals and Huntsman Exploration 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.