Correlation Between Forum Energy and Laramide Resources

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

Diversification Opportunities for Forum Energy and Laramide Resources

0.29

Correlation Coefficient

Forum Energy  Laramide Resources

Modest diversification

The 3 months correlation between Forum and Laramide is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Metals and Laramide Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laramide Resources 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 Laramide Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laramide Resources has no effect on the direction of Forum Energy i.e., Forum Energy and Laramide Resources go up and down completely randomly.

Pair Corralation between Forum Energy and Laramide Resources

Assuming the 90 days horizon Forum Energy Metals is expected to under-perform the Laramide Resources. In addition to that, Forum Energy is 1.33 times more volatile than Laramide Resources. It trades about -0.04 of its total potential returns per unit of risk. Laramide Resources is currently generating about 0.12 per unit of volatility. If you would invest  49.00  in Laramide Resources on September 16, 2024 and sell it today you would earn a total of  17.00  from holding Laramide Resources or generate 34.69% return on investment over 90 days.

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

Forum Energy Metals  vs.  Laramide Resources

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 unfluctuating 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.

Laramide Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laramide Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Laramide Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forum Energy and Laramide Resources

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

The idea behind Forum Energy Metals and Laramide Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.