Correlation Between Bluerock Homes and Forestar

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

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

Diversification Opportunities for Bluerock Homes and Forestar

-0.6

Correlation Coefficient

Bluerock Homes  Forestar

Excellent diversification

The 3 months correlation between Bluerock and Forestar is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bluerock Homes Trust and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and Bluerock Homes 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 Bluerock Homes Trust 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 Bluerock Homes i.e., Bluerock Homes and Forestar go up and down completely randomly.

Pair Corralation between Bluerock Homes and Forestar

Considering the 90-day investment horizon Bluerock Homes Trust is expected to generate 2.2 times more return on investment than Forestar. However, Bluerock Homes is 2.2 times more volatile than Forestar Group. It trades about -0.02 of its potential returns per unit of risk. Forestar Group is currently generating about -0.06 per unit of risk. If you would invest  1,495  in Bluerock Homes Trust on August 1, 2024 and sell it today you would lose (28.00) from holding Bluerock Homes Trust or give up 1.87% of portfolio value over 90 days.

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

Bluerock Homes Trust  vs.  Forestar Group

Bluerock Homes Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bluerock Homes Trust 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 technical indicators remain very healthy which may send shares a bit higher in November 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Forestar Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forestar Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Forestar is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bluerock Homes and Forestar

The main advantage of trading using opposite Bluerock Homes and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluerock Homes 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 Bluerock Homes Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.