Correlation Between New England and Forestar

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

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

Diversification Opportunities for New England and Forestar

-0.42

Correlation Coefficient

New England  Forestar

Very good diversification

The 3 months correlation between New and Forestar is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding New England Realty and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and New England 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 New England Realty 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 New England i.e., New England and Forestar go up and down completely randomly.

Pair Corralation between New England and Forestar

Considering the 90-day investment horizon New England Realty is expected to generate 37.07 times more return on investment than Forestar. However, New England is 37.07 times more volatile than Forestar Group. It trades about 0.08 of its potential returns per unit of risk. Forestar Group is currently generating about -0.03 per unit of risk. If you would invest  6,742  in New England Realty on October 7, 2024 and sell it today you would earn a total of  1,528  from holding New England Realty or generate 22.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.4%
Values	Daily Returns

New England Realty  vs.  Forestar Group

New England Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, New England is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Forestar Group

Risk-Adjusted Performance

0 of 100

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

Pair Trading with New England and Forestar

The main advantage of trading using opposite New England and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New England 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 New England Realty 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.