Correlation Between Royal Mail and United Parcel
Can any of the company-specific risk be diversified away by investing in both Royal Mail and United Parcel 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 Royal Mail and United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Mail PLC and United Parcel Service, you can compare the effects of market volatilities on Royal Mail and United Parcel 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 Royal Mail with a short position of United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Mail and United Parcel.
Diversification Opportunities for Royal Mail and United Parcel
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and United is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Royal Mail PLC and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service and Royal Mail 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 Royal Mail PLC are associated (or correlated) with United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Royal Mail i.e., Royal Mail and United Parcel go up and down completely randomly.
Pair Corralation between Royal Mail and United Parcel
Assuming the 90 days horizon Royal Mail PLC is expected to generate 0.23 times more return on investment than United Parcel. However, Royal Mail PLC is 4.4 times less risky than United Parcel. It trades about 0.05 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.1 per unit of risk. If you would invest 892.00 in Royal Mail PLC on November 4, 2024 and sell it today you would earn a total of 6.00 from holding Royal Mail PLC or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Mail PLC vs. United Parcel Service
Performance |
| Timeline |
| Royal Mail PLC |
| United Parcel Service |
Royal Mail and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Mail and United Parcel
The main advantage of trading using opposite Royal Mail and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Mail position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| Royal Mail vs. FedEx | Royal Mail vs. United Parcel Service | Royal Mail vs. Freightos Limited Ordinary | Royal Mail vs. Addentax Group Corp |
| United Parcel vs. GXO Logistics | United Parcel vs. JB Hunt Transport | United Parcel vs. Expeditors International of | United Parcel vs. CH Robinson Worldwide |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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