Correlation Between Forward Water and Eddy Smart

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

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

Diversification Opportunities for Forward Water and Eddy Smart

0.15

Correlation Coefficient

Forward Water  Eddy Smart

Average diversification

The 3 months correlation between Forward and Eddy is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Forward Water Technologies and Eddy Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eddy Smart Home and Forward Water 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 Water Technologies are associated (or correlated) with Eddy Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eddy Smart Home has no effect on the direction of Forward Water i.e., Forward Water and Eddy Smart go up and down completely randomly.

Pair Corralation between Forward Water and Eddy Smart

Assuming the 90 days trading horizon Forward Water Technologies is expected to generate 1.42 times more return on investment than Eddy Smart. However, Forward Water is 1.42 times more volatile than Eddy Smart Home. It trades about 0.07 of its potential returns per unit of risk. Eddy Smart Home is currently generating about 0.05 per unit of risk. If you would invest  6.00  in Forward Water Technologies on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Forward Water Technologies or generate 16.67% return on investment over 90 days.

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

Forward Water Technologies  vs.  Eddy Smart Home

Forward Water Techno

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Water Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Forward Water showed solid returns over the last few months and may actually be approaching a breakup point.

Eddy Smart Home

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eddy Smart Home are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eddy Smart showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forward Water and Eddy Smart

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

The idea behind Forward Water Technologies and Eddy Smart Home 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.