Correlation Between Forum Energy and Dmc Global

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

By analyzing existing cross correlation between Forum Energy Technologies and Dmc Global, you can compare the effects of market volatilities on Forum Energy and Dmc Global 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 Dmc Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Dmc Global.

Diversification Opportunities for Forum Energy and Dmc Global

0.42

Correlation Coefficient

Forum Energy  Dmc Global

Very weak diversification

The 3 months correlation between Forum and Dmc is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Technologies and Dmc Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dmc Global 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 Technologies are associated (or correlated) with Dmc Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dmc Global has no effect on the direction of Forum Energy i.e., Forum Energy and Dmc Global go up and down completely randomly.

Pair Corralation between Forum Energy and Dmc Global

Considering the 90-day investment horizon Forum Energy Technologies is expected to generate 0.86 times more return on investment than Dmc Global. However, Forum Energy Technologies is 1.17 times less risky than Dmc Global. It trades about 0.01 of its potential returns per unit of risk. Dmc Global is currently generating about -0.17 per unit of risk. If you would invest  1,580  in Forum Energy Technologies on September 12, 2024 and sell it today you would lose (3.00) from holding Forum Energy Technologies or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Forum Energy Technologies  vs.  Dmc Global

Forum Energy Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Forum Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Dmc Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dmc Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Forum Energy and Dmc Global

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

The idea behind Forum Energy Technologies and Dmc Global 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.