Correlation Between Forstrong Global and Caldwell Partners

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

By analyzing existing cross correlation between Forstrong Global Income and Caldwell Partners International, you can compare the effects of market volatilities on Forstrong Global and Caldwell Partners 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 Forstrong Global with a short position of Caldwell Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forstrong Global and Caldwell Partners.

Diversification Opportunities for Forstrong Global and Caldwell Partners

-0.49

Correlation Coefficient

Forstrong Global  Caldwell Partners

Very good diversification

The 3 months correlation between Forstrong and Caldwell is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners and Forstrong Global 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 Forstrong Global Income are associated (or correlated) with Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of Forstrong Global i.e., Forstrong Global and Caldwell Partners go up and down completely randomly.

Pair Corralation between Forstrong Global and Caldwell Partners

Assuming the 90 days trading horizon Forstrong Global Income is expected to generate 0.09 times more return on investment than Caldwell Partners. However, Forstrong Global Income is 11.71 times less risky than Caldwell Partners. It trades about 0.13 of its potential returns per unit of risk. Caldwell Partners International is currently generating about 0.01 per unit of risk. If you would invest  2,162  in Forstrong Global Income on November 29, 2024 and sell it today you would earn a total of  62.00  from holding Forstrong Global Income or generate 2.87% return on investment over 90 days.

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

Forstrong Global Income  vs.  Caldwell Partners Internationa

Forstrong Global Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forstrong Global Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Forstrong Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Caldwell Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caldwell Partners International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Caldwell Partners is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Forstrong Global and Caldwell Partners

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

The idea behind Forstrong Global Income and Caldwell Partners International 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.