Correlation Between Alphabet and FedEx
Can any of the company-specific risk be diversified away by investing in both Alphabet and FedEx 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 Alphabet and FedEx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and FedEx, you can compare the effects of market volatilities on Alphabet and FedEx 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 Alphabet with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and FedEx.
Diversification Opportunities for Alphabet and FedEx
Weak diversification
The 3 months correlation between Alphabet and FedEx is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Alphabet i.e., Alphabet and FedEx go up and down completely randomly.
Pair Corralation between Alphabet and FedEx
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the FedEx. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.52 times less risky than FedEx. The stock trades about 0.0 of its potential returns per unit of risk. The FedEx is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 23,162 in FedEx on September 1, 2024 and sell it today you would earn a total of 5,478 from holding FedEx or generate 23.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.18% |
| Values | Daily Returns |
Alphabet Inc Class C vs. FedEx
Performance |
| Timeline |
| Alphabet Class C |
| FedEx |
Alphabet and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and FedEx
The main advantage of trading using opposite Alphabet and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, FedEx 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 FedEx will offset losses from the drop in FedEx's long position.The idea behind Alphabet Inc Class C and FedEx 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.| FedEx vs. Performance Food Group | FedEx vs. Gol Intelligent Airlines | FedEx vs. LIFEWAY FOODS | FedEx vs. Tyson Foods |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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