Correlation Between Forward Industries and On Holding

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

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

Diversification Opportunities for Forward Industries and On Holding

0.6

Correlation Coefficient

Forward Industries  On Holding

Poor diversification

The 3 months correlation between Forward and ONON is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Forward Industries and On Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on On Holding and Forward Industries 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 Industries are associated (or correlated) with On Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of On Holding has no effect on the direction of Forward Industries i.e., Forward Industries and On Holding go up and down completely randomly.

Pair Corralation between Forward Industries and On Holding

Given the investment horizon of 90 days Forward Industries is expected to generate 3.48 times more return on investment than On Holding. However, Forward Industries is 3.48 times more volatile than On Holding. It trades about 0.07 of its potential returns per unit of risk. On Holding is currently generating about 0.12 per unit of risk. If you would invest  368.00  in Forward Industries on September 17, 2024 and sell it today you would earn a total of  86.00  from holding Forward Industries or generate 23.37% return on investment over 90 days.

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

Forward Industries  vs.  On Holding

Forward Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Industries are ranked lower than 5 (%) 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.

On Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in On Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, On Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forward Industries and On Holding

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

The idea behind Forward Industries and On Holding 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.