Correlation Between Basic Materials and FedEx
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and FedEx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and FedEx, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and FedEx.
Diversification Opportunities for Basic Materials and FedEx
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and FedEx is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and FedEx go up and down completely randomly.
Pair Corralation between Basic Materials and FedEx
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the FedEx. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 2.2 times less risky than FedEx. The index trades about 0.0 of its potential returns per unit of risk. The FedEx is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 102,004 in FedEx on December 1, 2024 and sell it today you would earn a total of 48,740 from holding FedEx or generate 47.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 68.62% |
| Values | Daily Returns |
Basic Materials vs. FedEx
Performance |
| Timeline |
Basic Materials and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
FedEx
Pair trading matchups for FedEx
Pair Trading with Basic Materials and FedEx
The main advantage of trading using opposite Basic Materials and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. SSC Technologies Holdings, | Basic Materials vs. Technos SA | Basic Materials vs. Check Point Software | Basic Materials vs. Westinghouse Air Brake |
| FedEx vs. Lojas Quero Quero SA | FedEx vs. Pet Center Comrcio | FedEx vs. Mliuz SA | FedEx vs. Ambipar Participaes e |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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