Correlation Between Holiday Island and Forestar

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

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

Diversification Opportunities for Holiday Island and Forestar

0.44

Correlation Coefficient

Holiday Island  Forestar

Very weak diversification

The 3 months correlation between Holiday and Forestar is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Island Holdings and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and Holiday Island 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 Holiday Island Holdings 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 Holiday Island i.e., Holiday Island and Forestar go up and down completely randomly.

Pair Corralation between Holiday Island and Forestar

Given the investment horizon of 90 days Holiday Island Holdings is expected to generate 9.74 times more return on investment than Forestar. However, Holiday Island is 9.74 times more volatile than Forestar Group. It trades about 0.03 of its potential returns per unit of risk. Forestar Group is currently generating about -0.11 per unit of risk. If you would invest  3.73  in Holiday Island Holdings on September 15, 2024 and sell it today you would lose (1.54) from holding Holiday Island Holdings or give up 41.29% of portfolio value over 90 days.

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

Holiday Island Holdings  vs.  Forestar Group

Holiday Island Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Holiday Island and Forestar

The main advantage of trading using opposite Holiday Island and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holiday Island 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 Holiday Island Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.