Correlation Between Forward Air and Landstar System

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

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

Diversification Opportunities for Forward Air and Landstar System

0.82

Correlation Coefficient

Forward Air  Landstar System

Very poor diversification

The 3 months correlation between Forward and Landstar is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Forward Air and Landstar System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landstar System 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 Landstar System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landstar System has no effect on the direction of Forward Air i.e., Forward Air and Landstar System go up and down completely randomly.

Pair Corralation between Forward Air and Landstar System

Given the investment horizon of 90 days Forward Air is expected to under-perform the Landstar System. In addition to that, Forward Air is 2.31 times more volatile than Landstar System. It trades about -0.2 of its total potential returns per unit of risk. Landstar System is currently generating about -0.15 per unit of volatility. If you would invest  17,005  in Landstar System on December 30, 2024 and sell it today you would lose (2,268) from holding Landstar System or give up 13.34% of portfolio value over 90 days.

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

Forward Air  vs.  Landstar System

Forward Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forward Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Landstar System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Landstar System has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Forward Air and Landstar System

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

The idea behind Forward Air and Landstar System 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.