Correlation Between High Liner and Forward Water

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

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

Diversification Opportunities for High Liner and Forward Water

-0.5

Correlation Coefficient

High Liner  Forward Water

Very good diversification

The 3 months correlation between High and Forward is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding High Liner Foods and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno and High Liner 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 High Liner Foods are associated (or correlated) with Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of High Liner i.e., High Liner and Forward Water go up and down completely randomly.

Pair Corralation between High Liner and Forward Water

Assuming the 90 days trading horizon High Liner Foods is expected to generate 0.17 times more return on investment than Forward Water. However, High Liner Foods is 5.98 times less risky than Forward Water. It trades about 0.27 of its potential returns per unit of risk. Forward Water Technologies is currently generating about -0.03 per unit of risk. If you would invest  1,234  in High Liner Foods on October 1, 2024 and sell it today you would earn a total of  358.00  from holding High Liner Foods or generate 29.01% return on investment over 90 days.

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

High Liner Foods  vs.  Forward Water Technologies

High Liner Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, High Liner displayed solid returns over the last few months and may actually be approaching a breakup point.

Forward Water Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forward Water Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with High Liner and Forward Water

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

The idea behind High Liner Foods and Forward Water Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.