Correlation Between Forestar and Alexanders

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

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

Diversification Opportunities for Forestar and Alexanders

0.64

Correlation Coefficient

Forestar  Alexanders

Poor diversification

The 3 months correlation between Forestar and Alexanders is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Alexanders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexanders and Forestar 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 Forestar Group are associated (or correlated) with Alexanders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexanders has no effect on the direction of Forestar i.e., Forestar and Alexanders go up and down completely randomly.

Pair Corralation between Forestar and Alexanders

Considering the 90-day investment horizon Forestar Group is expected to generate 1.05 times more return on investment than Alexanders. However, Forestar is 1.05 times more volatile than Alexanders. It trades about 0.2 of its potential returns per unit of risk. Alexanders is currently generating about 0.04 per unit of risk. If you would invest  1,992  in Forestar Group on May 14, 2025 and sell it today you would earn a total of  656.00  from holding Forestar Group or generate 32.93% return on investment over 90 days.

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

Forestar Group  vs.  Alexanders

Forestar Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forestar Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Forestar reported solid returns over the last few months and may actually be approaching a breakup point.

Alexanders

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alexanders are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Alexanders is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Forestar and Alexanders

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

The idea behind Forestar Group and Alexanders 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.