Correlation Between Kraken Energy and Forum Energy

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

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

Diversification Opportunities for Kraken Energy and Forum Energy

0.58

Correlation Coefficient

Kraken Energy  Forum Energy

Very weak diversification

The 3 months correlation between Kraken and Forum is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kraken Energy Corp 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 Kraken Energy 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 Kraken Energy Corp 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 Kraken Energy i.e., Kraken Energy and Forum Energy go up and down completely randomly.

Pair Corralation between Kraken Energy and Forum Energy

Assuming the 90 days horizon Kraken Energy Corp is expected to generate 1.04 times more return on investment than Forum Energy. However, Kraken Energy is 1.04 times more volatile than Forum Energy Metals. It trades about 0.03 of its potential returns per unit of risk. Forum Energy Metals is currently generating about 0.03 per unit of risk. If you would invest  2.00  in Kraken Energy Corp on December 29, 2024 and sell it today you would lose (0.40) from holding Kraken Energy Corp or give up 20.0% of portfolio value over 90 days.

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

Kraken Energy Corp  vs.  Forum Energy Metals

Kraken Energy Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kraken Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kraken Energy reported solid returns over the last few months and may actually be approaching a breakup point.

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 2 (%) 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 Kraken Energy and Forum Energy

The main advantage of trading using opposite Kraken Energy and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraken Energy 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 Kraken Energy Corp 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 CEOs Directory module to screen CEOs from public companies around the world.