Correlation Between Fathom Holdings and Forestar

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

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

Diversification Opportunities for Fathom Holdings and Forestar

0.91

Correlation Coefficient

Fathom Holdings  Forestar

Almost no diversification

The 3 months correlation between Fathom and Forestar is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Fathom Holdings and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and Fathom Holdings 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 Fathom Holdings are associated (or correlated) with Forestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forestar Group has no effect on the direction of Fathom Holdings i.e., Fathom Holdings and Forestar go up and down completely randomly.

Pair Corralation between Fathom Holdings and Forestar

Given the investment horizon of 90 days Fathom Holdings is expected to under-perform the Forestar. In addition to that, Fathom Holdings is 2.53 times more volatile than Forestar Group. It trades about -0.42 of its total potential returns per unit of risk. Forestar Group is currently generating about -0.31 per unit of volatility. If you would invest  2,834  in Forestar Group on October 7, 2024 and sell it today you would lose (243.00) from holding Forestar Group or give up 8.57% of portfolio value over 90 days.

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

Fathom Holdings  vs.  Forestar Group

Fathom Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fathom Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical 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.

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.

Pair Trading with Fathom Holdings and Forestar

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

The idea behind Fathom Holdings and Forestar Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.