Correlation Between FedEx and US Bancorp

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

Diversification Opportunities for FedEx and US Bancorp

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between FedEx and USB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of FedEx i.e., FedEx and US Bancorp go up and down completely randomly.

Pair Corralation between FedEx and US Bancorp

Assuming the 90 days trading horizon FedEx is expected to generate 1.74 times less return on investment than US Bancorp. In addition to that, FedEx is 1.22 times more volatile than US Bancorp. It trades about 0.08 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.17 per unit of volatility. If you would invest  70,120  in US Bancorp on September 19, 2024 and sell it today you would earn a total of  34,824  from holding US Bancorp or generate 49.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.2%
ValuesDaily Returns

FedEx  vs.  US Bancorp

 Performance 
       Timeline  
FedEx 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FedEx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, FedEx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
US Bancorp 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

FedEx and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FedEx and US Bancorp

The main advantage of trading using opposite FedEx and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
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The idea behind FedEx and US Bancorp 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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US Bancorp vs. The Goodyear Tire
US Bancorp vs. The Walt Disney
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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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