Correlation Between Global X and Forum Energy

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

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

Diversification Opportunities for Global X and Forum Energy

-0.12

Correlation Coefficient

Global X  Forum Energy

Good diversification

The 3 months correlation between Global and Forum is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active 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 Global X 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 Global X Active 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 Global X i.e., Global X and Forum Energy go up and down completely randomly.

Pair Corralation between Global X and Forum Energy

Assuming the 90 days trading horizon Global X is expected to generate 3.91 times less return on investment than Forum Energy. But when comparing it to its historical volatility, Global X Active is 16.53 times less risky than Forum Energy. It trades about 0.03 of its potential returns per unit of risk. Forum Energy Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Forum Energy Metals on December 30, 2024 and sell it today you would lose (1.50) from holding Forum Energy Metals or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Global X Active  vs.  Forum Energy Metals

Global X Active

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent 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 fairly stable basic indicators, Forum Energy is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Global X and Forum Energy

The main advantage of trading using opposite Global X and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Active 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.