Correlation Between Sun Hung and Forestar

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

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

Diversification Opportunities for Sun Hung and Forestar

0.54

Correlation Coefficient

Sun Hung  Forestar

Very weak diversification

The 3 months correlation between Sun and Forestar is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group and Sun Hung 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 Sun Hung Kai 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 Sun Hung i.e., Sun Hung and Forestar go up and down completely randomly.

Pair Corralation between Sun Hung and Forestar

Assuming the 90 days horizon Sun Hung Kai is expected to generate 0.99 times more return on investment than Forestar. However, Sun Hung Kai is 1.01 times less risky than Forestar. It trades about 0.0 of its potential returns per unit of risk. Forestar Group is currently generating about -0.11 per unit of risk. If you would invest  980.00  in Sun Hung Kai on September 15, 2024 and sell it today you would lose (11.00) from holding Sun Hung Kai or give up 1.12% of portfolio value over 90 days.

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

Sun Hung Kai  vs.  Forestar Group

Sun Hung Kai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Hung Kai has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Sun Hung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Sun Hung and Forestar

The main advantage of trading using opposite Sun Hung and Forestar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Hung 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 Sun Hung Kai 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.