Correlation Between FedEx and GXO Logistics

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

Diversification Opportunities for FedEx and GXO Logistics

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between FedEx and GXO is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and GXO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GXO Logistics 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 GXO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GXO Logistics has no effect on the direction of FedEx i.e., FedEx and GXO Logistics go up and down completely randomly.

Pair Corralation between FedEx and GXO Logistics

Considering the 90-day investment horizon FedEx is expected to generate 0.54 times more return on investment than GXO Logistics. However, FedEx is 1.86 times less risky than GXO Logistics. It trades about 0.41 of its potential returns per unit of risk. GXO Logistics is currently generating about -0.05 per unit of risk. If you would invest  26,805  in FedEx on August 24, 2024 and sell it today you would earn a total of  2,711  from holding FedEx or generate 10.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FedEx  vs.  GXO Logistics

 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 fundamental indicators, FedEx is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
GXO Logistics 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in GXO Logistics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, GXO Logistics displayed solid returns over the last few months and may actually be approaching a breakup point.

FedEx and GXO Logistics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FedEx and GXO Logistics

The main advantage of trading using opposite FedEx and GXO Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, GXO Logistics 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 GXO Logistics will offset losses from the drop in GXO Logistics' long position.
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The idea behind FedEx and GXO Logistics 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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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 CEOs Directory module to screen CEOs from public companies around the world.

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