Correlation Between Forward Air and FedEx

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

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

Diversification Opportunities for Forward Air and FedEx

-0.3

Correlation Coefficient

Forward Air  FedEx

Very good diversification

The 3 months correlation between Forward and FedEx is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Forward Air and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 are associated (or correlated) with FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Forward Air i.e., Forward Air and FedEx go up and down completely randomly.

Pair Corralation between Forward Air and FedEx

Given the investment horizon of 90 days Forward Air is expected to generate 1.31 times more return on investment than FedEx. However, Forward Air is 1.31 times more volatile than FedEx. It trades about 0.05 of its potential returns per unit of risk. FedEx is currently generating about 0.02 per unit of risk. If you would invest  3,350  in Forward Air on September 4, 2024 and sell it today you would earn a total of  250.00  from holding Forward Air or generate 7.46% return on investment over 90 days.

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

Forward Air  vs.  FedEx

Forward Air

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Air are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Forward Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FedEx

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, FedEx is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Forward Air and FedEx

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

The idea behind Forward Air and FedEx 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.