Correlation Between FORWARD AIR and INVITATION HOMES

Can any of the company-specific risk be diversified away by investing in both FORWARD AIR and INVITATION HOMES 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 INVITATION HOMES 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 INVITATION HOMES DL, you can compare the effects of market volatilities on FORWARD AIR and INVITATION HOMES 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 INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORWARD AIR and INVITATION HOMES.

Diversification Opportunities for FORWARD AIR and INVITATION HOMES

-0.65

Correlation Coefficient

FORWARD AIR  INVITATION HOMES

Excellent diversification

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

Pair Corralation between FORWARD AIR and INVITATION HOMES

Assuming the 90 days horizon FORWARD AIR P is expected to under-perform the INVITATION HOMES. In addition to that, FORWARD AIR is 2.72 times more volatile than INVITATION HOMES DL. It trades about -0.16 of its total potential returns per unit of risk. INVITATION HOMES DL is currently generating about 0.05 per unit of volatility. If you would invest  3,034  in INVITATION HOMES DL on December 28, 2024 and sell it today you would earn a total of  106.00  from holding INVITATION HOMES DL or generate 3.49% return on investment over 90 days.

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

FORWARD AIR P  vs.  INVITATION HOMES DL

FORWARD AIR P

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INVITATION HOMES

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INVITATION HOMES DL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FORWARD AIR and INVITATION HOMES

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

The idea behind FORWARD AIR P and INVITATION HOMES DL 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.