Correlation Between Forestar and Stratus Properties

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

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

Diversification Opportunities for Forestar and Stratus Properties

-0.13

Correlation Coefficient

Forestar  Stratus Properties

Good diversification

The 3 months correlation between Forestar and Stratus is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Stratus Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratus Properties 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 Stratus Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratus Properties has no effect on the direction of Forestar i.e., Forestar and Stratus Properties go up and down completely randomly.

Pair Corralation between Forestar and Stratus Properties

Considering the 90-day investment horizon Forestar Group is expected to generate 0.57 times more return on investment than Stratus Properties. However, Forestar Group is 1.76 times less risky than Stratus Properties. It trades about 0.17 of its potential returns per unit of risk. Stratus Properties is currently generating about 0.01 per unit of risk. If you would invest  1,985  in Forestar Group on May 4, 2025 and sell it today you would earn a total of  530.00  from holding Forestar Group or generate 26.7% return on investment over 90 days.

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

Forestar Group  vs.  Stratus Properties

Forestar Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forestar Group are ranked lower than 13 (%) 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.

Stratus Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stratus Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stratus Properties is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Forestar and Stratus Properties

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

The idea behind Forestar Group and Stratus Properties 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.