Correlation Between Dr Martens and Forward Industries

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

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

Diversification Opportunities for Dr Martens and Forward Industries

-0.02

Correlation Coefficient

Dr Martens  Forward Industries

Good diversification

The 3 months correlation between DOCMF and Forward is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dr Martens plc and Forward Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Industries and Dr Martens 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 Dr Martens plc 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 Dr Martens i.e., Dr Martens and Forward Industries go up and down completely randomly.

Pair Corralation between Dr Martens and Forward Industries

Assuming the 90 days horizon Dr Martens is expected to generate 2.48 times less return on investment than Forward Industries. But when comparing it to its historical volatility, Dr Martens plc is 1.12 times less risky than Forward Industries. It trades about 0.11 of its potential returns per unit of risk. Forward Industries is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  352.00  in Forward Industries on September 1, 2024 and sell it today you would earn a total of  54.00  from holding Forward Industries or generate 15.34% return on investment over 90 days.

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

Dr Martens plc  vs.  Forward Industries

Dr Martens plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dr Martens plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Forward Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Industries are ranked lower than 3 (%) 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 Dr Martens and Forward Industries

The main advantage of trading using opposite Dr Martens and Forward Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Martens 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 Dr Martens plc 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.