Correlation Between Northern Shield and Foraco International

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

By analyzing existing cross correlation between Northern Shield Resources and Foraco International SA, you can compare the effects of market volatilities on Northern Shield and Foraco International 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 Northern Shield with a short position of Foraco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Shield and Foraco International.

Diversification Opportunities for Northern Shield and Foraco International

-0.57

Correlation Coefficient

Northern Shield  Foraco International

Excellent diversification

The 3 months correlation between Northern and Foraco is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Northern Shield Resources and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International and Northern Shield 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 Northern Shield Resources are associated (or correlated) with Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Northern Shield i.e., Northern Shield and Foraco International go up and down completely randomly.

Pair Corralation between Northern Shield and Foraco International

Assuming the 90 days horizon Northern Shield Resources is expected to under-perform the Foraco International. In addition to that, Northern Shield is 3.09 times more volatile than Foraco International SA. It trades about -0.01 of its total potential returns per unit of risk. Foraco International SA is currently generating about 0.08 per unit of volatility. If you would invest  207.00  in Foraco International SA on September 13, 2024 and sell it today you would earn a total of  27.00  from holding Foraco International SA or generate 13.04% return on investment over 90 days.

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

Northern Shield Resources  vs.  Foraco International SA

Northern Shield Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Shield Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Foraco International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Shield and Foraco International

The main advantage of trading using opposite Northern Shield and Foraco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Shield position performs unexpectedly, Foraco International 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 Foraco International will offset losses from the drop in Foraco International's long position.

The idea behind Northern Shield Resources and Foraco International SA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.