Correlation Between Forstrong Global and IA Clarington

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

Diversification Opportunities for Forstrong Global and IA Clarington

0.65

Correlation Coefficient

Forstrong Global  IA Clarington

Poor diversification

The 3 months correlation between Forstrong and ISIF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and IA Clarington Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Strategic 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 IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Strategic has no effect on the direction of Forstrong Global i.e., Forstrong Global and IA Clarington go up and down completely randomly.

Pair Corralation between Forstrong Global and IA Clarington

Assuming the 90 days trading horizon Forstrong Global is expected to generate 4.4 times less return on investment than IA Clarington. But when comparing it to its historical volatility, Forstrong Global Income is 1.25 times less risky than IA Clarington. It trades about 0.0 of its potential returns per unit of risk. IA Clarington Strategic is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,189  in IA Clarington Strategic on October 6, 2024 and sell it today you would earn a total of  1.00  from holding IA Clarington Strategic or generate 0.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Forstrong Global Income  vs.  IA Clarington Strategic

Forstrong Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forstrong Global Income has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

IA Clarington Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IA Clarington Strategic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IA Clarington 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 IA Clarington

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

The idea behind Forstrong Global Income and IA Clarington Strategic 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.