Correlation Between FORWARD AIR and Auto Trader

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

By analyzing existing cross correlation between FORWARD AIR P and Auto Trader Group, you can compare the effects of market volatilities on FORWARD AIR and Auto Trader 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 FORWARD AIR with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORWARD AIR and Auto Trader.

Diversification Opportunities for FORWARD AIR and Auto Trader

0.44

Correlation Coefficient

FORWARD AIR  Auto Trader

Very weak diversification

The 3 months correlation between FORWARD and Auto is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and FORWARD AIR 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 FORWARD AIR P are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and Auto Trader go up and down completely randomly.

Pair Corralation between FORWARD AIR and Auto Trader

Assuming the 90 days horizon FORWARD AIR P is expected to generate 3.24 times more return on investment than Auto Trader. However, FORWARD AIR is 3.24 times more volatile than Auto Trader Group. It trades about 0.07 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.09 per unit of risk. If you would invest  2,780  in FORWARD AIR P on October 6, 2024 and sell it today you would earn a total of  280.00  from holding FORWARD AIR P or generate 10.07% return on investment over 90 days.

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

FORWARD AIR P  vs.  Auto Trader Group

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORWARD AIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FORWARD AIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FORWARD AIR and Auto Trader

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

The idea behind FORWARD AIR P and Auto Trader Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.