Correlation Between FedEx and Lakeside Holding
Can any of the company-specific risk be diversified away by investing in both FedEx and Lakeside Holding 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 Lakeside Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FedEx and Lakeside Holding Limited, you can compare the effects of market volatilities on FedEx and Lakeside Holding 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 Lakeside Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and Lakeside Holding.
Diversification Opportunities for FedEx and Lakeside Holding
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FedEx and Lakeside is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and Lakeside Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeside Holding 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 Lakeside Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeside Holding has no effect on the direction of FedEx i.e., FedEx and Lakeside Holding go up and down completely randomly.
Pair Corralation between FedEx and Lakeside Holding
Considering the 90-day investment horizon FedEx is expected to generate 0.21 times more return on investment than Lakeside Holding. However, FedEx is 4.87 times less risky than Lakeside Holding. It trades about 0.08 of its potential returns per unit of risk. Lakeside Holding Limited is currently generating about 0.01 per unit of risk. If you would invest 24,550 in FedEx on September 3, 2024 and sell it today you would earn a total of 5,119 from holding FedEx or generate 20.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 87.2% |
| Values | Daily Returns |
FedEx vs. Lakeside Holding Limited
Performance |
| Timeline |
| FedEx |
| Lakeside Holding |
FedEx and Lakeside Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FedEx and Lakeside Holding
The main advantage of trading using opposite FedEx and Lakeside Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, Lakeside Holding 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 Lakeside Holding will offset losses from the drop in Lakeside Holding's long position.The idea behind FedEx and Lakeside Holding Limited 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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