Correlation Between Forum Energy and Natural Gas

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

By analyzing existing cross correlation between Forum Energy Technologies and Natural Gas Services, you can compare the effects of market volatilities on Forum Energy and Natural Gas 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 Forum Energy with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Natural Gas.

Diversification Opportunities for Forum Energy and Natural Gas

0.65

Correlation Coefficient

Forum Energy  Natural Gas

Poor diversification

The 3 months correlation between Forum and Natural is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Technologies and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services and Forum Energy 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 Forum Energy Technologies are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Forum Energy i.e., Forum Energy and Natural Gas go up and down completely randomly.

Pair Corralation between Forum Energy and Natural Gas

Considering the 90-day investment horizon Forum Energy is expected to generate 1.65 times less return on investment than Natural Gas. But when comparing it to its historical volatility, Forum Energy Technologies is 1.25 times less risky than Natural Gas. It trades about 0.25 of its potential returns per unit of risk. Natural Gas Services is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,865  in Natural Gas Services on February 13, 2025 and sell it today you would earn a total of  692.00  from holding Natural Gas Services or generate 37.1% return on investment over 90 days.

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

Forum Energy Technologies  vs.  Natural Gas Services

Forum Energy Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forum Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Forum Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Natural Gas Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Gas Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Natural Gas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Forum Energy and Natural Gas

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

The idea behind Forum Energy Technologies and Natural Gas Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.