Correlation Between Empire Global and Forest Laboratories

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

By analyzing existing cross correlation between Empire Global Gaming and Forest Laboratories, you can compare the effects of market volatilities on Empire Global and Forest Laboratories 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 Empire Global with a short position of Forest Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Global and Forest Laboratories.

Diversification Opportunities for Empire Global and Forest Laboratories

0.0

Correlation Coefficient

Empire Global  Forest Laboratories

Pay attention - limited upside

The 3 months correlation between Empire and Forest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Forest Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forest Laboratories and Empire Global 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 Empire Global Gaming are associated (or correlated) with Forest Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forest Laboratories has no effect on the direction of Empire Global i.e., Empire Global and Forest Laboratories go up and down completely randomly.

Pair Corralation between Empire Global and Forest Laboratories

If you would invest  5.50  in Empire Global Gaming on January 31, 2024 and sell it today you would lose (5.47) from holding Empire Global Gaming or give up 99.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Empire Global Gaming  vs.  Forest Laboratories

Empire Global Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Empire Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Forest Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Empire Global and Forest Laboratories

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

The idea behind Empire Global Gaming and Forest Laboratories 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.