Correlation Between Forstrong Global and SKRR Exploration

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

Diversification Opportunities for Forstrong Global and SKRR Exploration

0.13

Correlation Coefficient

Forstrong Global  SKRR Exploration

Average diversification

The 3 months correlation between Forstrong and SKRR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and SKRR Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKRR Exploration 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 SKRR Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKRR Exploration has no effect on the direction of Forstrong Global i.e., Forstrong Global and SKRR Exploration go up and down completely randomly.

Pair Corralation between Forstrong Global and SKRR Exploration

Assuming the 90 days trading horizon Forstrong Global Income is expected to generate 0.07 times more return on investment than SKRR Exploration. However, Forstrong Global Income is 13.4 times less risky than SKRR Exploration. It trades about -0.05 of its potential returns per unit of risk. SKRR Exploration is currently generating about -0.1 per unit of risk. If you would invest  2,180  in Forstrong Global Income on October 22, 2024 and sell it today you would lose (7.00) from holding Forstrong Global Income or give up 0.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Forstrong Global Income  vs.  SKRR Exploration

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.

SKRR Exploration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SKRR Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SKRR Exploration may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Forstrong Global and SKRR Exploration

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

The idea behind Forstrong Global Income and SKRR Exploration 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.