Correlation Between Forward Industries and Salesforce

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

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

Diversification Opportunities for Forward Industries and Salesforce

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Correlation Coefficient

Forward Industries  Salesforce

Pay attention - limited upside

The 3 months correlation between Forward and Salesforce is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Forward Industries and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce and Forward Industries 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 Forward Industries are associated (or correlated) with Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Forward Industries i.e., Forward Industries and Salesforce go up and down completely randomly.

Pair Corralation between Forward Industries and Salesforce

Given the investment horizon of 90 days Forward Industries is expected to under-perform the Salesforce. In addition to that, Forward Industries is 1.57 times more volatile than Salesforce. It trades about -0.04 of its total potential returns per unit of risk. Salesforce is currently generating about 0.06 per unit of volatility. If you would invest  16,106  in Salesforce on January 31, 2024 and sell it today you would earn a total of  11,468  from holding Salesforce or generate 71.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Forward Industries  vs.  Salesforce

Forward Industries

Risk-Adjusted Performance

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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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Salesforce

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Forward Industries and Salesforce

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

The idea behind Forward Industries and Salesforce 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.