Correlation Between United Parcel and Auto Trader
Can any of the company-specific risk be diversified away by investing in both United Parcel and Auto Trader 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 United Parcel and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Auto Trader Group, you can compare the effects of market volatilities on United Parcel and Auto Trader 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 United Parcel with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Auto Trader.
Diversification Opportunities for United Parcel and Auto Trader
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Auto is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and United Parcel 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 United Parcel Service are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of United Parcel i.e., United Parcel and Auto Trader go up and down completely randomly.
Pair Corralation between United Parcel and Auto Trader
Assuming the 90 days trading horizon United Parcel Service is expected to generate 0.79 times more return on investment than Auto Trader. However, United Parcel Service is 1.26 times less risky than Auto Trader. It trades about 0.07 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.17 per unit of risk. If you would invest 12,932 in United Parcel Service on August 24, 2024 and sell it today you would earn a total of 269.00 from holding United Parcel Service or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Parcel Service vs. Auto Trader Group
Performance |
| Timeline |
| United Parcel Service |
| Auto Trader Group |
United Parcel and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parcel and Auto Trader
The main advantage of trading using opposite United Parcel and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| United Parcel vs. Naked Wines plc | United Parcel vs. Tata Steel Limited | United Parcel vs. Solstad Offshore ASA | United Parcel vs. Dalata Hotel Group |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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