Correlation Between HP and Forum Energy

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

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

Diversification Opportunities for HP and Forum Energy

0.63

Correlation Coefficient

HP  Forum Energy

Poor diversification

The 3 months correlation between HP and Forum is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc 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 HP 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 HP Inc 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 HP i.e., HP and Forum Energy go up and down completely randomly.

Pair Corralation between HP and Forum Energy

Considering the 90-day investment horizon HP Inc is expected to under-perform the Forum Energy. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 7.98 times less risky than Forum Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Forum Energy Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Forum Energy Metals on December 26, 2024 and sell it today you would lose (1.43) from holding Forum Energy Metals or give up 28.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

HP Inc  vs.  Forum Energy Metals

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc 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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Forum Energy Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Forum Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and Forum Energy

The main advantage of trading using opposite HP and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.