Correlation Between Cannae Holdings and Forza Petroleum

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

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

Diversification Opportunities for Cannae Holdings and Forza Petroleum

0.0

Correlation Coefficient

Cannae Holdings  Forza Petroleum

Pay attention - limited upside

The 3 months correlation between Cannae and Forza is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cannae Holdings and Forza Petroleum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forza Petroleum and Cannae Holdings 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 Cannae Holdings are associated (or correlated) with Forza Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forza Petroleum has no effect on the direction of Cannae Holdings i.e., Cannae Holdings and Forza Petroleum go up and down completely randomly.

Pair Corralation between Cannae Holdings and Forza Petroleum

Given the investment horizon of 90 days Cannae Holdings is expected to generate 1.78 times less return on investment than Forza Petroleum. But when comparing it to its historical volatility, Cannae Holdings is 2.05 times less risky than Forza Petroleum. It trades about 0.01 of its potential returns per unit of risk. Forza Petroleum Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Forza Petroleum Limited on September 4, 2024 and sell it today you would lose (1.00) from holding Forza Petroleum Limited or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	30.51%
Values	Daily Returns

Cannae Holdings  vs.  Forza Petroleum Limited

Cannae Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Cannae Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Forza Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forza Petroleum Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Forza Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cannae Holdings and Forza Petroleum

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

The idea behind Cannae Holdings and Forza Petroleum Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.