Correlation Between Forward Industries and Culp

Can any of the company-specific risk be diversified away by investing in both Forward Industries and Culp 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 Industries and Culp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Forward Industries and Culp Inc, you can compare the effects of market volatilities on Forward Industries and Culp 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 Industries with a short position of Culp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forward Industries and Culp.

Diversification Opportunities for Forward Industries and Culp

0.22

Correlation Coefficient

Forward Industries  Culp

Modest diversification

The 3 months correlation between Forward and Culp is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Forward Industries and Culp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Culp Inc and Forward Industries 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 Industries are associated (or correlated) with Culp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Culp Inc has no effect on the direction of Forward Industries i.e., Forward Industries and Culp go up and down completely randomly.

Pair Corralation between Forward Industries and Culp

Given the investment horizon of 90 days Forward Industries is expected to under-perform the Culp. In addition to that, Forward Industries is 1.45 times more volatile than Culp Inc. It trades about -0.04 of its total potential returns per unit of risk. Culp Inc is currently generating about -0.03 per unit of volatility. If you would invest  580.00  in Culp Inc on December 28, 2024 and sell it today you would lose (45.00) from holding Culp Inc or give up 7.76% of portfolio value over 90 days.

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

Forward Industries  vs.  Culp Inc

Forward Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forward Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Culp Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Culp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Culp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Forward Industries and Culp

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

The idea behind Forward Industries and Culp Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.