Correlation Between Forum Energy and Geospace Technologies

Can any of the company-specific risk be diversified away by investing in both Forum Energy and Geospace Technologies 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 Geospace Technologies 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 Geospace Technologies, you can compare the effects of market volatilities on Forum Energy and Geospace Technologies 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 Geospace Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Geospace Technologies.

Diversification Opportunities for Forum Energy and Geospace Technologies

-0.55

Correlation Coefficient

Forum Energy  Geospace Technologies

Excellent diversification

The 3 months correlation between Forum and Geospace is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Technologies and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies 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 Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of Forum Energy i.e., Forum Energy and Geospace Technologies go up and down completely randomly.

Pair Corralation between Forum Energy and Geospace Technologies

Considering the 90-day investment horizon Forum Energy Technologies is expected to generate 1.02 times more return on investment than Geospace Technologies. However, Forum Energy is 1.02 times more volatile than Geospace Technologies. It trades about 0.2 of its potential returns per unit of risk. Geospace Technologies is currently generating about -0.18 per unit of risk. If you would invest  1,515  in Forum Energy Technologies on December 29, 2024 and sell it today you would earn a total of  587.00  from holding Forum Energy Technologies or generate 38.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Forum Energy Technologies  vs.  Geospace Technologies

Forum Energy Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Forum Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Geospace Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geospace Technologies 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Forum Energy and Geospace Technologies

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

The idea behind Forum Energy Technologies and Geospace Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.