Correlation Between Forward Air and Hub

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

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

Diversification Opportunities for Forward Air and Hub

-0.09

Correlation Coefficient

Forward Air  Hub

Good diversification

The 3 months correlation between Forward and Hub is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Forward Air and Hub Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Group 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 Hub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Group has no effect on the direction of Forward Air i.e., Forward Air and Hub go up and down completely randomly.

Pair Corralation between Forward Air and Hub

Given the investment horizon of 90 days Forward Air is expected to under-perform the Hub. In addition to that, Forward Air is 2.42 times more volatile than Hub Group. It trades about -0.05 of its total potential returns per unit of risk. Hub Group is currently generating about 0.05 per unit of volatility. If you would invest  3,862  in Hub Group on August 31, 2024 and sell it today you would earn a total of  1,302  from holding Hub Group or generate 33.71% 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.  Hub Group

Forward Air

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Air are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Forward Air exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hub Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Hub reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forward Air and Hub

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

The idea behind Forward Air and Hub Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.