Correlation Between Forestar and Lead Real

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

By analyzing existing cross correlation between Forestar Group and Lead Real Estate, you can compare the effects of market volatilities on Forestar and Lead Real 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 Lead Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forestar and Lead Real.

Diversification Opportunities for Forestar and Lead Real

-0.66

Correlation Coefficient

Forestar  Lead Real

Excellent diversification

The 3 months correlation between Forestar and Lead is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Lead Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lead Real Estate 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 Lead Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lead Real Estate has no effect on the direction of Forestar i.e., Forestar and Lead Real go up and down completely randomly.

Pair Corralation between Forestar and Lead Real

Considering the 90-day investment horizon Forestar Group is expected to generate 0.06 times more return on investment than Lead Real. However, Forestar Group is 16.16 times less risky than Lead Real. It trades about -0.63 of its potential returns per unit of risk. Lead Real Estate is currently generating about -0.22 per unit of risk. If you would invest  3,077  in Forestar Group on September 24, 2024 and sell it today you would lose (496.00) from holding Forestar Group or give up 16.12% of portfolio value over 90 days.

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

Forestar Group  vs.  Lead Real Estate

Forestar Group

Risk-Adjusted Performance

0 of 100

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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Lead Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lead Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Forestar and Lead Real

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

The idea behind Forestar Group and Lead Real Estate 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.