Correlation Between Social Life and Forwardly

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

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

Diversification Opportunities for Social Life and Forwardly

-0.21

Correlation Coefficient

Social Life  Forwardly

Very good diversification

The 3 months correlation between Social and Forwardly is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Social Life Network and Forwardly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forwardly and Social Life 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 Social Life Network are associated (or correlated) with Forwardly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forwardly has no effect on the direction of Social Life i.e., Social Life and Forwardly go up and down completely randomly.

Pair Corralation between Social Life and Forwardly

Given the investment horizon of 90 days Social Life Network is expected to generate 1.43 times more return on investment than Forwardly. However, Social Life is 1.43 times more volatile than Forwardly. It trades about 0.16 of its potential returns per unit of risk. Forwardly is currently generating about 0.01 per unit of risk. If you would invest  0.03  in Social Life Network on September 13, 2024 and sell it today you would earn a total of  0.01  from holding Social Life Network or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Social Life Network  vs.  Forwardly

Social Life Network

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Social Life Network are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Social Life reported solid returns over the last few months and may actually be approaching a breakup point.

Forwardly

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Forwardly are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Forwardly showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Social Life and Forwardly

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

The idea behind Social Life Network and Forwardly 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.