Correlation Between FirstService Corp and Forward Water

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

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

Diversification Opportunities for FirstService Corp and Forward Water

-0.65

Correlation Coefficient

FirstService Corp  Forward Water

Excellent diversification

The 3 months correlation between FirstService and Forward is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno and FirstService Corp 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 FirstService Corp are associated (or correlated) with Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of FirstService Corp i.e., FirstService Corp and Forward Water go up and down completely randomly.

Pair Corralation between FirstService Corp and Forward Water

Assuming the 90 days trading horizon FirstService Corp is expected to generate 1.4 times less return on investment than Forward Water. But when comparing it to its historical volatility, FirstService Corp is 8.63 times less risky than Forward Water. It trades about 0.18 of its potential returns per unit of risk. Forward Water Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Forward Water Technologies on September 4, 2024 and sell it today you would lose (0.50) from holding Forward Water Technologies or give up 5.0% of portfolio value over 90 days.

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

FirstService Corp  vs.  Forward Water Technologies

FirstService Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FirstService Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Forward Water Techno

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Water Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Forward Water showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FirstService Corp and Forward Water

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

The idea behind FirstService Corp and Forward Water Technologies 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.