Correlation Between Forestar and Forrester Research

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

By analyzing existing cross correlation between Forestar Group and Forrester Research, you can compare the effects of market volatilities on Forestar and Forrester Research 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 Forestar with a short position of Forrester Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forestar and Forrester Research.

Diversification Opportunities for Forestar and Forrester Research

0.8

Correlation Coefficient

Forestar  Forrester Research

Very poor diversification

The 3 months correlation between Forestar and Forrester is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Forrester Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forrester Research and Forestar 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 Forestar Group are associated (or correlated) with Forrester Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forrester Research has no effect on the direction of Forestar i.e., Forestar and Forrester Research go up and down completely randomly.

Pair Corralation between Forestar and Forrester Research

Considering the 90-day investment horizon Forestar Group is expected to generate 0.98 times more return on investment than Forrester Research. However, Forestar Group is 1.02 times less risky than Forrester Research. It trades about -0.15 of its potential returns per unit of risk. Forrester Research is currently generating about -0.25 per unit of risk. If you would invest  2,985  in Forestar Group on November 29, 2024 and sell it today you would lose (610.00) from holding Forestar Group or give up 20.44% of portfolio value over 90 days.

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

Forestar Group  vs.  Forrester Research

Forestar Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forestar Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Forrester Research

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forrester Research has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Forestar and Forrester Research

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

The idea behind Forestar Group and Forrester Research 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 Transaction History module to view history of all your transactions and understand their impact on performance.