Correlation Between FedEx and Sea
Can any of the company-specific risk be diversified away by investing in both FedEx and Sea 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 FedEx and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FedEx and Sea Limited, you can compare the effects of market volatilities on FedEx and Sea 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 FedEx with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and Sea.
Diversification Opportunities for FedEx and Sea
Weak diversification
The 3 months correlation between FedEx and Sea is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited and FedEx 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 FedEx are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of FedEx i.e., FedEx and Sea go up and down completely randomly.
Pair Corralation between FedEx and Sea
Assuming the 90 days horizon FedEx is expected to generate 2.87 times less return on investment than Sea. But when comparing it to its historical volatility, FedEx is 1.33 times less risky than Sea. It trades about 0.08 of its potential returns per unit of risk. Sea Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 8,650 in Sea Limited on November 1, 2024 and sell it today you would earn a total of 3,030 from holding Sea Limited or generate 35.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FedEx vs. Sea Limited
Performance |
| Timeline |
| FedEx |
| Sea Limited |
FedEx and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FedEx and Sea
The main advantage of trading using opposite FedEx and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| FedEx vs. Amkor Technology | FedEx vs. FUYO GENERAL LEASE | FedEx vs. Easy Software AG | FedEx vs. WILLIS LEASE FIN |
| Sea vs. Coor Service Management | Sea vs. ADRIATIC METALS LS 013355 | Sea vs. Perseus Mining Limited | Sea vs. ARDAGH METAL PACDL 0001 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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