Correlation Between Shengfeng Development and Forward Air

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

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

Diversification Opportunities for Shengfeng Development and Forward Air

0.72

Correlation Coefficient

Shengfeng Development  Forward Air

Poor diversification

The 3 months correlation between Shengfeng and Forward is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shengfeng Development Limited and Forward Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Air and Shengfeng Development 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 Shengfeng Development Limited are associated (or correlated) with Forward Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Air has no effect on the direction of Shengfeng Development i.e., Shengfeng Development and Forward Air go up and down completely randomly.

Pair Corralation between Shengfeng Development and Forward Air

Given the investment horizon of 90 days Shengfeng Development Limited is expected to under-perform the Forward Air. In addition to that, Shengfeng Development is 1.18 times more volatile than Forward Air. It trades about -0.25 of its total potential returns per unit of risk. Forward Air is currently generating about -0.24 per unit of volatility. If you would invest  3,730  in Forward Air on September 27, 2024 and sell it today you would lose (941.00) from holding Forward Air or give up 25.23% of portfolio value over 90 days.

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

Shengfeng Development Limited  vs.  Forward Air

Shengfeng Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengfeng Development Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Forward Air

Risk-Adjusted Performance

0 of 100

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Shengfeng Development and Forward Air

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

The idea behind Shengfeng Development Limited and Forward Air 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.