Correlation Between FORWARD AIR and GMO Internet

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

Diversification Opportunities for FORWARD AIR and GMO Internet

-0.09

Correlation Coefficient

FORWARD AIR  GMO Internet

Good diversification

The 3 months correlation between FORWARD and GMO is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and GMO Internet go up and down completely randomly.

Pair Corralation between FORWARD AIR and GMO Internet

Assuming the 90 days horizon FORWARD AIR P is expected to under-perform the GMO Internet. In addition to that, FORWARD AIR is 1.39 times more volatile than GMO Internet. It trades about -0.38 of its total potential returns per unit of risk. GMO Internet is currently generating about -0.1 per unit of volatility. If you would invest  1,660  in GMO Internet on October 4, 2024 and sell it today you would lose (60.00) from holding GMO Internet or give up 3.61% of portfolio value over 90 days.

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

FORWARD AIR P  vs.  GMO Internet

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.

GMO Internet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet 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 GMO Internet

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

The idea behind FORWARD AIR P and GMO Internet 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.