Correlation Between CHINA SOUTHN and FORWARD AIR

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

By analyzing existing cross correlation between CHINA SOUTHN AIR H and FORWARD AIR P, you can compare the effects of market volatilities on CHINA SOUTHN 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 CHINA SOUTHN with a short position of FORWARD AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and FORWARD AIR.

Diversification Opportunities for CHINA SOUTHN and FORWARD AIR

0.24

Correlation Coefficient

CHINA SOUTHN  FORWARD AIR

Modest diversification

The 3 months correlation between CHINA and FORWARD is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P and CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 P has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and FORWARD AIR go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and FORWARD AIR

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 0.73 times more return on investment than FORWARD AIR. However, CHINA SOUTHN AIR H is 1.36 times less risky than FORWARD AIR. It trades about -0.05 of its potential returns per unit of risk. FORWARD AIR P is currently generating about -0.16 per unit of risk. If you would invest  51.00  in CHINA SOUTHN AIR H on December 21, 2024 and sell it today you would lose (5.00) from holding CHINA SOUTHN AIR H or give up 9.8% of portfolio value over 90 days.

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

CHINA SOUTHN AIR H   vs.  FORWARD AIR P

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

FORWARD AIR P

Risk-Adjusted Performance

Very Weak

Over the last 90 days FORWARD AIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CHINA SOUTHN and FORWARD AIR

The main advantage of trading using opposite CHINA SOUTHN and FORWARD AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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 CHINA SOUTHN AIR H and FORWARD AIR P 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.