Correlation Between FORWARD AIR and CHINA SOUTHN

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

Diversification Opportunities for FORWARD AIR and CHINA SOUTHN

-0.56

Correlation Coefficient

FORWARD AIR  CHINA SOUTHN

Excellent diversification

The 3 months correlation between FORWARD and CHINA is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR 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 CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between FORWARD AIR and CHINA SOUTHN

Assuming the 90 days horizon FORWARD AIR P is expected to generate 1.35 times more return on investment than CHINA SOUTHN. However, FORWARD AIR is 1.35 times more volatile than CHINA SOUTHN AIR H . It trades about -0.02 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about -0.17 per unit of risk. If you would invest  3,140  in FORWARD AIR P on October 12, 2024 and sell it today you would lose (60.00) from holding FORWARD AIR P or give up 1.91% of portfolio value over 90 days.

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

FORWARD AIR P  vs.  CHINA SOUTHN AIR H

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.

CHINA SOUTHN AIR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SOUTHN AIR H are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CHINA SOUTHN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORWARD AIR and CHINA SOUTHN

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

The idea behind FORWARD AIR P and CHINA SOUTHN AIR H 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.