Correlation Between Carters and Forward Industries

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

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

Diversification Opportunities for Carters and Forward Industries

-0.25

Correlation Coefficient

Carters  Forward Industries

Very good diversification

The 3 months correlation between Carters and Forward is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Forward Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Industries and Carters 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 Carters are associated (or correlated) with Forward Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Industries has no effect on the direction of Carters i.e., Carters and Forward Industries go up and down completely randomly.

Pair Corralation between Carters and Forward Industries

Considering the 90-day investment horizon Carters is expected to under-perform the Forward Industries. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 2.65 times less risky than Forward Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Forward Industries is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Forward Industries on November 19, 2024 and sell it today you would lose (564.00) from holding Forward Industries or give up 49.91% of portfolio value over 90 days.

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

Carters  vs.  Forward Industries

Carters

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carters are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Carters is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Forward Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Forward Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carters and Forward Industries

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

The idea behind Carters and Forward Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.