Correlation Between Forestar and Ascendas India

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

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

Diversification Opportunities for Forestar and Ascendas India

0.72

Correlation Coefficient

Forestar  Ascendas India

Poor diversification

The 3 months correlation between Forestar and Ascendas is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Forestar Group and Ascendas India Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendas India Trust 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 Ascendas India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendas India Trust has no effect on the direction of Forestar i.e., Forestar and Ascendas India go up and down completely randomly.

Pair Corralation between Forestar and Ascendas India

Considering the 90-day investment horizon Forestar Group is expected to under-perform the Ascendas India. But the stock apears to be less risky and, when comparing its historical volatility, Forestar Group is 1.18 times less risky than Ascendas India. The stock trades about -0.16 of its potential returns per unit of risk. The Ascendas India Trust is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Ascendas India Trust on September 17, 2024 and sell it today you would lose (7.00) from holding Ascendas India Trust or give up 8.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Forestar Group  vs.  Ascendas India Trust

Forestar Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forestar Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ascendas India Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascendas India Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Forestar and Ascendas India

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

The idea behind Forestar Group and Ascendas India Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.