Correlation Between FORWARD AIR and Pentair Plc

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

Diversification Opportunities for FORWARD AIR and Pentair Plc

0.09

Correlation Coefficient

FORWARD AIR  Pentair Plc

Significant diversification

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

Pair Corralation between FORWARD AIR and Pentair Plc

Assuming the 90 days horizon FORWARD AIR P is expected to under-perform the Pentair Plc. In addition to that, FORWARD AIR is 2.64 times more volatile than Pentair plc. It trades about -0.03 of its total potential returns per unit of risk. Pentair plc is currently generating about 0.11 per unit of volatility. If you would invest  4,561  in Pentair plc on September 19, 2024 and sell it today you would earn a total of  5,609  from holding Pentair plc or generate 122.98% 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.  Pentair plc

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pentair plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORWARD AIR and Pentair Plc

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

The idea behind FORWARD AIR P and Pentair plc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.