Correlation Between Now and Forum Energy

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

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

Diversification Opportunities for Now and Forum Energy

0.65

Correlation Coefficient

Now  Forum Energy

Poor diversification

The 3 months correlation between Now and Forum is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Forum Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Technologies and Now 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 Now Inc 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 Technologies has no effect on the direction of Now i.e., Now and Forum Energy go up and down completely randomly.

Pair Corralation between Now and Forum Energy

Given the investment horizon of 90 days Now Inc is expected to generate 0.9 times more return on investment than Forum Energy. However, Now Inc is 1.11 times less risky than Forum Energy. It trades about 0.07 of its potential returns per unit of risk. Forum Energy Technologies is currently generating about -0.14 per unit of risk. If you would invest  1,245  in Now Inc on July 4, 2024 and sell it today you would earn a total of  30.00  from holding Now Inc or generate 2.41% return on investment over 90 days.

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

Now Inc  vs.  Forum Energy Technologies

Now Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Now Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Now is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Forum Energy Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Forum Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Now and Forum Energy

The main advantage of trading using opposite Now and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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 Now Inc and Forum Energy Technologies 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.