Correlation Between Forward Air and Air T

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

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

Diversification Opportunities for Forward Air and Air T

0.03

Correlation Coefficient

Forward Air  Air T

Significant diversification

The 3 months correlation between Forward and Air is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Forward Air and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T Inc 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 are associated (or correlated) with Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of Forward Air i.e., Forward Air and Air T go up and down completely randomly.

Pair Corralation between Forward Air and Air T

Given the investment horizon of 90 days Forward Air is expected to generate 2.73 times more return on investment than Air T. However, Forward Air is 2.73 times more volatile than Air T Inc. It trades about 0.08 of its potential returns per unit of risk. Air T Inc is currently generating about 0.06 per unit of risk. If you would invest  3,224  in Forward Air on September 3, 2024 and sell it today you would earn a total of  445.00  from holding Forward Air or generate 13.8% return on investment over 90 days.

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

Forward Air  vs.  Air T Inc

Forward Air

Risk-Adjusted Performance

6 of 100

Modest

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

Air T Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Air T is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Forward Air and Air T

The main advantage of trading using opposite Forward Air and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forward Air position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind Forward Air and Air T 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.