Correlation Between FirstService Corp and Forestar

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

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

Diversification Opportunities for FirstService Corp and Forestar

0.92

Correlation Coefficient

FirstService Corp  Forestar

Almost no diversification

The 3 months correlation between FirstService and Forestar is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and FirstService Corp 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 FirstService Corp 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 FirstService Corp i.e., FirstService Corp and Forestar go up and down completely randomly.

Pair Corralation between FirstService Corp and Forestar

Considering the 90-day investment horizon FirstService Corp is expected to generate 2.74 times less return on investment than Forestar. But when comparing it to its historical volatility, FirstService Corp is 1.56 times less risky than Forestar. It trades about 0.15 of its potential returns per unit of risk. Forestar Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,891  in Forestar Group on May 21, 2025 and sell it today you would earn a total of  862.00  from holding Forestar Group or generate 45.58% return on investment over 90 days.

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

FirstService Corp  vs.  Forestar Group

FirstService Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, FirstService Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Forestar Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Forestar Group are ranked lower than 21 (%) 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.

Pair Trading with FirstService Corp and Forestar

The main advantage of trading using opposite FirstService Corp and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstService Corp 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 FirstService Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.