Correlation Between Forum Energy and EnCore Energy

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

By analyzing existing cross correlation between Forum Energy Metals and enCore Energy Corp, you can compare the effects of market volatilities on Forum Energy and EnCore Energy 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 EnCore Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and EnCore Energy.

Diversification Opportunities for Forum Energy and EnCore Energy

0.62

Correlation Coefficient

Forum Energy  EnCore Energy

Poor diversification

The 3 months correlation between Forum and EnCore is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Metals and enCore Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on enCore Energy Corp 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 Metals are associated (or correlated) with EnCore Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of enCore Energy Corp has no effect on the direction of Forum Energy i.e., Forum Energy and EnCore Energy go up and down completely randomly.

Pair Corralation between Forum Energy and EnCore Energy

Assuming the 90 days horizon Forum Energy Metals is expected to under-perform the EnCore Energy. In addition to that, Forum Energy is 2.57 times more volatile than enCore Energy Corp. It trades about -0.37 of its total potential returns per unit of risk. enCore Energy Corp is currently generating about -0.29 per unit of volatility. If you would invest  528.00  in enCore Energy Corp on September 17, 2024 and sell it today you would lose (75.00) from holding enCore Energy Corp or give up 14.2% of portfolio value over 90 days.

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

Forum Energy Metals  vs.  enCore Energy Corp

Forum Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forum Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

enCore Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days enCore Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnCore Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Forum Energy and EnCore Energy

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

The idea behind Forum Energy Metals and enCore Energy Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.