Correlation Between Lead Real and Forestar

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

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

Diversification Opportunities for Lead Real and Forestar

0.86

Correlation Coefficient

Lead Real  Forestar

Very poor diversification

The 3 months correlation between Lead and Forestar is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lead Real Estate and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and Lead Real 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 Lead Real Estate 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 Lead Real i.e., Lead Real and Forestar go up and down completely randomly.

Pair Corralation between Lead Real and Forestar

Considering the 90-day investment horizon Lead Real Estate is expected to under-perform the Forestar. In addition to that, Lead Real is 2.2 times more volatile than Forestar Group. It trades about -0.12 of its total potential returns per unit of risk. Forestar Group is currently generating about -0.1 per unit of volatility. If you would invest  2,570  in Forestar Group on December 27, 2024 and sell it today you would lose (391.00) from holding Forestar Group or give up 15.21% of portfolio value over 90 days.

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

Lead Real Estate  vs.  Forestar Group

Lead Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lead Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Forestar Group

Risk-Adjusted Performance

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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Lead Real and Forestar

The main advantage of trading using opposite Lead Real and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lead Real 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 Lead Real Estate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.