Correlation Between Premium Income and Forward Water

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

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

Diversification Opportunities for Premium Income and Forward Water

0.6

Correlation Coefficient

Premium Income  Forward Water

Poor diversification

The 3 months correlation between Premium and Forward is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income 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 Premium Income 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 Premium Income 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 Premium Income i.e., Premium Income and Forward Water go up and down completely randomly.

Pair Corralation between Premium Income and Forward Water

Assuming the 90 days trading horizon Premium Income is expected to under-perform the Forward Water. But the stock apears to be less risky and, when comparing its historical volatility, Premium Income is 6.16 times less risky than Forward Water. The stock trades about -0.08 of its potential returns per unit of risk. The Forward Water Technologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Forward Water Technologies on September 21, 2024 and sell it today you would lose (2.00) from holding Forward Water Technologies or give up 20.0% of portfolio value over 90 days.

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

Premium Income  vs.  Forward Water Technologies

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 fairly stable basic indicators, Forward Water is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Premium Income and Forward Water

The main advantage of trading using opposite Premium Income and Forward Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Income 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 Premium Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.