Correlation Between Halliburton and Forum Energy

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

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

Diversification Opportunities for Halliburton and Forum Energy

-0.02

Correlation Coefficient

Halliburton  Forum Energy

Good diversification

The 3 months correlation between Halliburton and Forum is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and Forum Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Technologies and Halliburton 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 Halliburton 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 Technologies has no effect on the direction of Halliburton i.e., Halliburton and Forum Energy go up and down completely randomly.

Pair Corralation between Halliburton and Forum Energy

Considering the 90-day investment horizon Halliburton is expected to under-perform the Forum Energy. But the stock apears to be less risky and, when comparing its historical volatility, Halliburton is 1.6 times less risky than Forum Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Forum Energy Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,515  in Forum Energy Technologies on December 29, 2024 and sell it today you would earn a total of  587.00  from holding Forum Energy Technologies or generate 38.75% return on investment over 90 days.

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

Halliburton  vs.  Forum Energy Technologies

Halliburton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Halliburton is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Forum Energy Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Forum Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Halliburton and Forum Energy

The main advantage of trading using opposite Halliburton and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton 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 Halliburton and Forum Energy Technologies 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.