Correlation Between Crocs and Forward Industries

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Can any of the company-specific risk be diversified away by investing in both Crocs and Forward Industries 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 Crocs and Forward Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crocs Inc and Forward Industries, you can compare the effects of market volatilities on Crocs and Forward Industries 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 Crocs with a short position of Forward Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crocs and Forward Industries.

Diversification Opportunities for Crocs and Forward Industries

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Crocs and Forward is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Forward Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Industries and Crocs 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 Crocs Inc are associated (or correlated) with Forward Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Industries has no effect on the direction of Crocs i.e., Crocs and Forward Industries go up and down completely randomly.

Pair Corralation between Crocs and Forward Industries

Given the investment horizon of 90 days Crocs Inc is expected to generate 0.22 times more return on investment than Forward Industries. However, Crocs Inc is 4.63 times less risky than Forward Industries. It trades about 0.4 of its potential returns per unit of risk. Forward Industries is currently generating about -0.02 per unit of risk. If you would invest  12,109  in Crocs Inc on December 29, 2023 and sell it today you would earn a total of  2,193  from holding Crocs Inc or generate 18.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Crocs Inc  vs.  Forward Industries

 Performance 
       Timeline  
Crocs Inc 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Crocs Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Crocs showed solid returns over the last few months and may actually be approaching a breakup point.
Forward Industries 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Forward Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Crocs and Forward Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Crocs and Forward Industries

The main advantage of trading using opposite Crocs and Forward Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crocs position performs unexpectedly, Forward Industries 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 Industries will offset losses from the drop in Forward Industries' long position.
The idea behind Crocs Inc and Forward Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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