Correlation Between Fjordland Exploration and Foraco International

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

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

Diversification Opportunities for Fjordland Exploration and Foraco International

0.06

Correlation Coefficient

Fjordland Exploration  Foraco International

Significant diversification

The 3 months correlation between Fjordland and Foraco is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fjordland Exploration and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International and Fjordland Exploration 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 Fjordland Exploration are associated (or correlated) with Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Fjordland Exploration i.e., Fjordland Exploration and Foraco International go up and down completely randomly.

Pair Corralation between Fjordland Exploration and Foraco International

Assuming the 90 days horizon Fjordland Exploration is expected to generate 4.98 times more return on investment than Foraco International. However, Fjordland Exploration is 4.98 times more volatile than Foraco International SA. It trades about 0.16 of its potential returns per unit of risk. Foraco International SA is currently generating about -0.24 per unit of risk. If you would invest  1.00  in Fjordland Exploration on December 10, 2024 and sell it today you would earn a total of  0.50  from holding Fjordland Exploration or generate 50.0% return on investment over 90 days.

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

Fjordland Exploration  vs.  Foraco International SA

Fjordland Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fjordland Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Fjordland Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Foraco International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fjordland Exploration and Foraco International

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

The idea behind Fjordland Exploration and Foraco International SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.