Correlation Between Maiden Holdings and Forza Petroleum

Can any of the company-specific risk be diversified away by investing in both Maiden 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 Maiden 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 Maiden Holdings and Forza Petroleum Limited, you can compare the effects of market volatilities on Maiden 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 Maiden Holdings with a short position of Forza Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maiden Holdings and Forza Petroleum.

Diversification Opportunities for Maiden Holdings and Forza Petroleum

0.0

Correlation Coefficient

Maiden Holdings  Forza Petroleum

Pay attention - limited upside

The 3 months correlation between Maiden and Forza is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Maiden 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 Maiden 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 Maiden 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 Maiden Holdings i.e., Maiden Holdings and Forza Petroleum go up and down completely randomly.

Pair Corralation between Maiden Holdings and Forza Petroleum

Given the investment horizon of 90 days Maiden Holdings is expected to generate 0.68 times more return on investment than Forza Petroleum. However, Maiden Holdings is 1.46 times less risky than Forza Petroleum. It trades about 0.03 of its potential returns per unit of risk. Forza Petroleum Limited is currently generating about 0.01 per unit of risk. If you would invest  1,343  in Maiden Holdings on September 4, 2024 and sell it today you would earn a total of  297.00  from holding Maiden Holdings or generate 22.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	31.2%
Values	Daily Returns

Maiden Holdings  vs.  Forza Petroleum Limited

Maiden Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maiden Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Maiden Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Maiden Holdings and Forza Petroleum

The main advantage of trading using opposite Maiden Holdings and Forza Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maiden 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 Maiden 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.