Correlation Between Adidas AG and Forward Industries

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

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

Diversification Opportunities for Adidas AG and Forward Industries

-0.15

Correlation Coefficient

Adidas AG  Forward Industries

Good diversification

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

Pair Corralation between Adidas AG and Forward Industries

Assuming the 90 days horizon Adidas AG ADR is expected to under-perform the Forward Industries. But the otc stock apears to be less risky and, when comparing its historical volatility, Adidas AG ADR is 1.49 times less risky than Forward Industries. The otc stock trades about -0.06 of its potential returns per unit of risk. The Forward Industries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  359.00  in Forward Industries on September 2, 2024 and sell it today you would earn a total of  47.00  from holding Forward Industries or generate 13.09% return on investment over 90 days.

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

Adidas AG ADR  vs.  Forward Industries

Adidas AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adidas AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Forward Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Forward Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adidas AG and Forward Industries

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

The idea behind Adidas AG ADR and Forward Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.