Correlation Between Forum Energy and Cactus

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

Diversification Opportunities for Forum Energy and Cactus

0.37

Correlation Coefficient

Forum Energy  Cactus

Weak diversification

The 3 months correlation between Forum and Cactus is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Technologies and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc 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 Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of Forum Energy i.e., Forum Energy and Cactus go up and down completely randomly.

Pair Corralation between Forum Energy and Cactus

Considering the 90-day investment horizon Forum Energy Technologies is expected to generate 1.84 times more return on investment than Cactus. However, Forum Energy is 1.84 times more volatile than Cactus Inc. It trades about -0.1 of its potential returns per unit of risk. Cactus Inc is currently generating about -0.55 per unit of risk. If you would invest  1,525  in Forum Energy Technologies on September 23, 2024 and sell it today you would lose (104.00) from holding Forum Energy Technologies or give up 6.82% of portfolio value over 90 days.

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

Forum Energy Technologies  vs.  Cactus Inc

Forum Energy Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cactus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cactus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Forum Energy and Cactus

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

The idea behind Forum Energy Technologies and Cactus Inc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.