Correlation Between Foraco International and Commander Resources

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

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

Diversification Opportunities for Foraco International and Commander Resources

0.27

Correlation Coefficient

Foraco International  Commander Resources

Modest diversification

The 3 months correlation between Foraco and Commander is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources and Foraco International 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 Foraco International SA are associated (or correlated) with Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Foraco International i.e., Foraco International and Commander Resources go up and down completely randomly.

Pair Corralation between Foraco International and Commander Resources

Assuming the 90 days trading horizon Foraco International is expected to generate 8.03 times less return on investment than Commander Resources. But when comparing it to its historical volatility, Foraco International SA is 3.1 times less risky than Commander Resources. It trades about 0.04 of its potential returns per unit of risk. Commander Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Commander Resources on September 15, 2024 and sell it today you would earn a total of  1.00  from holding Commander Resources or generate 14.29% return on investment over 90 days.

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

Foraco International SA  vs.  Commander Resources

Foraco International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Commander Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commander Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Commander Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foraco International and Commander Resources

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

The idea behind Foraco International SA and Commander Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.