Correlation Between Forward Industries and Lennar

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

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

Diversification Opportunities for Forward Industries and Lennar

-0.66

Correlation Coefficient

Forward Industries  Lennar

Excellent diversification

The 3 months correlation between Forward and Lennar is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Forward Industries and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Forward Industries i.e., Forward Industries and Lennar go up and down completely randomly.

Pair Corralation between Forward Industries and Lennar

Given the investment horizon of 90 days Forward Industries is expected to generate 3.56 times more return on investment than Lennar. However, Forward Industries is 3.56 times more volatile than Lennar. It trades about 0.02 of its potential returns per unit of risk. Lennar is currently generating about -0.03 per unit of risk. If you would invest  528.00  in Forward Industries on September 24, 2024 and sell it today you would lose (79.00) from holding Forward Industries or give up 14.96% of portfolio value over 90 days.

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

Forward Industries  vs.  Lennar

Forward Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Industries are ranked lower than 7 (%) 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.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Forward Industries and Lennar

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

The idea behind Forward Industries and Lennar 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.