Correlation Between Foraco International and Hammond Power

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

By analyzing existing cross correlation between Foraco International SA and Hammond Power Solutions, you can compare the effects of market volatilities on Foraco International and Hammond Power 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 Foraco International with a short position of Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foraco International and Hammond Power.

Diversification Opportunities for Foraco International and Hammond Power

0.07

Correlation Coefficient

Foraco International  Hammond Power

Significant diversification

The 3 months correlation between Foraco and Hammond is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions and Foraco International 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 Foraco International SA are associated (or correlated) with Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Foraco International i.e., Foraco International and Hammond Power go up and down completely randomly.

Pair Corralation between Foraco International and Hammond Power

Assuming the 90 days trading horizon Foraco International SA is expected to under-perform the Hammond Power. But the stock apears to be less risky and, when comparing its historical volatility, Foraco International SA is 1.05 times less risky than Hammond Power. The stock trades about -0.02 of its potential returns per unit of risk. The Hammond Power Solutions is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  9,193  in Hammond Power Solutions on April 24, 2025 and sell it today you would earn a total of  4,008  from holding Hammond Power Solutions or generate 43.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Foraco International SA  vs.  Hammond Power Solutions

Foraco International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foraco International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Foraco International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hammond Power Solutions

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hammond Power Solutions are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hammond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foraco International and Hammond Power

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

The idea behind Foraco International SA and Hammond Power Solutions 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.