Correlation Between FedEx and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both FedEx and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FedEx and Verizon Communications, you can compare the effects of market volatilities on FedEx and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and Verizon Communications.
Diversification Opportunities for FedEx and Verizon Communications
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FedEx and Verizon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of FedEx i.e., FedEx and Verizon Communications go up and down completely randomly.
Pair Corralation between FedEx and Verizon Communications
Assuming the 90 days trading horizon FedEx is expected to generate 1.63 times less return on investment than Verizon Communications. In addition to that, FedEx is 1.11 times more volatile than Verizon Communications. It trades about 0.06 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.11 per unit of volatility. If you would invest 53,554 in Verizon Communications on September 4, 2024 and sell it today you would earn a total of 37,196 from holding Verizon Communications or generate 69.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.65% |
| Values | Daily Returns |
FedEx vs. Verizon Communications
Performance |
| Timeline |
| FedEx |
| Verizon Communications |
FedEx and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FedEx and Verizon Communications
The main advantage of trading using opposite FedEx and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| FedEx vs. McEwen Mining | FedEx vs. Cognizant Technology Solutions | FedEx vs. Ameriprise Financial | FedEx vs. Grupo Hotelero Santa |
| Verizon Communications vs. Fomento Econmico Mexicano | Verizon Communications vs. Grupo Mxico SAB | Verizon Communications vs. Grupo Financiero Banorte | Verizon Communications vs. Alfa SAB de |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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