Correlation Between Forestar and Murano Global

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

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

Diversification Opportunities for Forestar and Murano Global

-0.59

Correlation Coefficient

Forestar  Murano Global

Excellent diversification

The 3 months correlation between Forestar and Murano is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Murano Global Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murano Global Investments 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 Murano Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murano Global Investments has no effect on the direction of Forestar i.e., Forestar and Murano Global go up and down completely randomly.

Pair Corralation between Forestar and Murano Global

Considering the 90-day investment horizon Forestar Group is expected to under-perform the Murano Global. But the stock apears to be less risky and, when comparing its historical volatility, Forestar Group is 2.03 times less risky than Murano Global. The stock trades about -0.31 of its potential returns per unit of risk. The Murano Global Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Murano Global Investments on October 6, 2024 and sell it today you would earn a total of  34.00  from holding Murano Global Investments or generate 3.25% return on investment over 90 days.

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

Forestar Group  vs.  Murano Global Investments

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

Murano Global Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Murano Global Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Murano Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forestar and Murano Global

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

The idea behind Forestar Group and Murano Global Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.