Correlation Between Forward Industries and Dr Martens

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

By analyzing existing cross correlation between Forward Industries and Dr Martens plc, you can compare the effects of market volatilities on Forward Industries and Dr Martens 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 Dr Martens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forward Industries and Dr Martens.

Diversification Opportunities for Forward Industries and Dr Martens

0.1

Correlation Coefficient

Forward Industries  Dr Martens

Average diversification

The 3 months correlation between Forward and DOCMF is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Forward Industries and Dr Martens plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Martens plc 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 Dr Martens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Martens plc has no effect on the direction of Forward Industries i.e., Forward Industries and Dr Martens go up and down completely randomly.

Pair Corralation between Forward Industries and Dr Martens

Given the investment horizon of 90 days Forward Industries is expected to generate 1.39 times more return on investment than Dr Martens. However, Forward Industries is 1.39 times more volatile than Dr Martens plc. It trades about 0.09 of its potential returns per unit of risk. Dr Martens plc is currently generating about -0.01 per unit of risk. If you would invest  406.00  in Forward Industries on December 1, 2024 and sell it today you would earn a total of  72.00  from holding Forward Industries or generate 17.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Forward Industries  vs.  Dr Martens plc

Forward Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Forward Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dr Martens plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dr Martens plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Dr Martens 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 Industries and Dr Martens

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

The idea behind Forward Industries and Dr Martens 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.