Correlation Between Forestar and Gaucho Group

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

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

Diversification Opportunities for Forestar and Gaucho Group

0.62

Correlation Coefficient

Forestar  Gaucho Group

Poor diversification

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

Pair Corralation between Forestar and Gaucho Group

Considering the 90-day investment horizon Forestar Group is expected to generate 0.15 times more return on investment than Gaucho Group. However, Forestar Group is 6.5 times less risky than Gaucho Group. It trades about -0.12 of its potential returns per unit of risk. Gaucho Group Holdings is currently generating about -0.17 per unit of risk. If you would invest  3,296  in Forestar Group on October 18, 2024 and sell it today you would lose (571.00) from holding Forestar Group or give up 17.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	59.76%
Values	Daily Returns

Forestar Group  vs.  Gaucho Group Holdings

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.

Gaucho Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaucho Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Forestar and Gaucho Group

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

The idea behind Forestar Group and Gaucho Group Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.