Correlation Between FORWARD AIR and Food Life

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

By analyzing existing cross correlation between FORWARD AIR P and Food Life Companies, you can compare the effects of market volatilities on FORWARD AIR and Food Life 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 Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORWARD AIR and Food Life.

Diversification Opportunities for FORWARD AIR and Food Life

-0.29

Correlation Coefficient

FORWARD AIR  Food Life

Very good diversification

The 3 months correlation between FORWARD and Food is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies 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 P are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and Food Life go up and down completely randomly.

Pair Corralation between FORWARD AIR and Food Life

Assuming the 90 days horizon FORWARD AIR P is expected to under-perform the Food Life. In addition to that, FORWARD AIR is 1.73 times more volatile than Food Life Companies. It trades about -0.36 of its total potential returns per unit of risk. Food Life Companies is currently generating about -0.17 per unit of volatility. If you would invest  2,160  in Food Life Companies on October 1, 2024 and sell it today you would lose (100.00) from holding Food Life Companies or give up 4.63% of portfolio value over 90 days.

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

FORWARD AIR P  vs.  Food Life Companies

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, FORWARD AIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Food Life Companies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORWARD AIR and Food Life

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

The idea behind FORWARD AIR P and Food Life Companies 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 Valuation module to check real value of public entities based on technical and fundamental data.