Correlation Between Forsee Power and Waga Energy

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

By analyzing existing cross correlation between Forsee Power SAS and Waga Energy SA, you can compare the effects of market volatilities on Forsee Power and Waga Energy 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 Forsee Power with a short position of Waga Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forsee Power and Waga Energy.

Diversification Opportunities for Forsee Power and Waga Energy

0.44

Correlation Coefficient

Forsee Power  Waga Energy

Very weak diversification

The 3 months correlation between Forsee and Waga is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Forsee Power SAS and Waga Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waga Energy SA and Forsee Power 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 Forsee Power SAS are associated (or correlated) with Waga Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waga Energy SA has no effect on the direction of Forsee Power i.e., Forsee Power and Waga Energy go up and down completely randomly.

Pair Corralation between Forsee Power and Waga Energy

Assuming the 90 days trading horizon Forsee Power SAS is expected to under-perform the Waga Energy. In addition to that, Forsee Power is 1.04 times more volatile than Waga Energy SA. It trades about -0.11 of its total potential returns per unit of risk. Waga Energy SA is currently generating about -0.02 per unit of volatility. If you would invest  2,835  in Waga Energy SA on October 11, 2024 and sell it today you would lose (1,163) from holding Waga Energy SA or give up 41.02% of portfolio value over 90 days.

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

Forsee Power SAS  vs.  Waga Energy SA

Forsee Power SAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forsee Power SAS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak 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.

Waga Energy SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waga Energy SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Waga Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Forsee Power and Waga Energy

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

The idea behind Forsee Power SAS and Waga Energy SA 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.