Correlation Between Geodrill and Forum Energy

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

By analyzing existing cross correlation between Geodrill Limited and Forum Energy Metals, you can compare the effects of market volatilities on Geodrill and Forum 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 Geodrill with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geodrill and Forum Energy.

Diversification Opportunities for Geodrill and Forum Energy

-0.45

Correlation Coefficient

Geodrill  Forum Energy

Very good diversification

The 3 months correlation between Geodrill and Forum is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals and Geodrill 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 Geodrill Limited are associated (or correlated) with Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Geodrill i.e., Geodrill and Forum Energy go up and down completely randomly.

Pair Corralation between Geodrill and Forum Energy

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 0.19 times more return on investment than Forum Energy. However, Geodrill Limited is 5.36 times less risky than Forum Energy. It trades about 0.05 of its potential returns per unit of risk. Forum Energy Metals is currently generating about -0.03 per unit of risk. If you would invest  295.00  in Geodrill Limited on December 4, 2024 and sell it today you would earn a total of  14.00  from holding Geodrill Limited or generate 4.75% return on investment over 90 days.

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

Geodrill Limited  vs.  Forum Energy Metals

Geodrill Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Geodrill is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Forum Energy Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forum Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Geodrill and Forum Energy

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

The idea behind Geodrill Limited and Forum Energy Metals 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 Global Correlations module to find global opportunities by holding instruments from different markets.