Correlation Between ZTO Express and Forward Air

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

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

Diversification Opportunities for ZTO Express and Forward Air

0.44

Correlation Coefficient

ZTO Express  Forward Air

Very weak diversification

The 3 months correlation between ZTO and Forward is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding ZTO Express and Forward Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Air and ZTO Express 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 ZTO Express are associated (or correlated) with Forward Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Air has no effect on the direction of ZTO Express i.e., ZTO Express and Forward Air go up and down completely randomly.

Pair Corralation between ZTO Express and Forward Air

Considering the 90-day investment horizon ZTO Express is expected to under-perform the Forward Air. But the stock apears to be less risky and, when comparing its historical volatility, ZTO Express is 1.18 times less risky than Forward Air. The stock trades about -0.08 of its potential returns per unit of risk. The Forward Air is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,402  in Forward Air on September 12, 2024 and sell it today you would lose (63.00) from holding Forward Air or give up 1.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ZTO Express  vs.  Forward Air

ZTO Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO Express 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Forward Air

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Forward Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Forward Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ZTO Express and Forward Air

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

The idea behind ZTO Express and Forward Air 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.