Correlation Between FORWARD AIR and NORWEGIAN AIR

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

Diversification Opportunities for FORWARD AIR and NORWEGIAN AIR

0.05

Correlation Coefficient

FORWARD AIR  NORWEGIAN AIR

Significant diversification

The 3 months correlation between FORWARD and NORWEGIAN is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT 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 NORWEGIAN AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORWEGIAN AIR SHUT has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between FORWARD AIR and NORWEGIAN AIR

Assuming the 90 days horizon FORWARD AIR P is expected to generate 1.52 times more return on investment than NORWEGIAN AIR. However, FORWARD AIR is 1.52 times more volatile than NORWEGIAN AIR SHUT. It trades about 0.07 of its potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about 0.01 per unit of risk. If you would invest  2,980  in FORWARD AIR P on September 5, 2024 and sell it today you would earn a total of  420.00  from holding FORWARD AIR P or generate 14.09% return on investment over 90 days.

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

FORWARD AIR P  vs.  NORWEGIAN AIR SHUT

FORWARD AIR P

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FORWARD AIR P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FORWARD AIR reported solid returns over the last few months and may actually be approaching a breakup point.

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORWEGIAN AIR SHUT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NORWEGIAN AIR is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FORWARD AIR and NORWEGIAN AIR

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

The idea behind FORWARD AIR P and NORWEGIAN AIR SHUT 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.