Correlation Between American CuMo and Forum Energy

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

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

Diversification Opportunities for American CuMo and Forum Energy

0.3

Correlation Coefficient

American CuMo  Forum Energy

Weak diversification

The 3 months correlation between American and Forum is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American CuMo Mining 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 American CuMo 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 American CuMo Mining 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 American CuMo i.e., American CuMo and Forum Energy go up and down completely randomly.

Pair Corralation between American CuMo and Forum Energy

Assuming the 90 days horizon American CuMo Mining is expected to under-perform the Forum Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, American CuMo Mining is 17.51 times less risky than Forum Energy. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Forum Energy Metals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Forum Energy Metals on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Forum Energy Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

American CuMo Mining  vs.  Forum Energy Metals

American CuMo Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days American CuMo Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, American CuMo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 5 (%) 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 American CuMo and Forum Energy

The main advantage of trading using opposite American CuMo and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American CuMo 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 American CuMo Mining 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.