Correlation Between Verizon Communications and FedEx
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and FedEx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and FedEx, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and FedEx.
Diversification Opportunities for Verizon Communications and FedEx
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Verizon and FedEx is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and FedEx go up and down completely randomly.
Pair Corralation between Verizon Communications and FedEx
Assuming the 90 days horizon Verizon Communications is expected to generate 0.9 times more return on investment than FedEx. However, Verizon Communications is 1.11 times less risky than FedEx. It trades about 0.11 of its potential returns per unit of risk. FedEx is currently generating about 0.06 per unit of risk. If you would invest 53,554 in Verizon Communications on September 4, 2024 and sell it today you would earn a total of 37,196 from holding Verizon Communications or generate 69.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.65% |
| Values | Daily Returns |
Verizon Communications vs. FedEx
Performance |
| Timeline |
| Verizon Communications |
| FedEx |
Verizon Communications and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and FedEx
The main advantage of trading using opposite Verizon Communications and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Fomento Econmico Mexicano | Verizon Communications vs. Grupo Mxico SAB | Verizon Communications vs. Grupo Financiero Banorte | Verizon Communications vs. Alfa SAB de |
| FedEx vs. McEwen Mining | FedEx vs. Cognizant Technology Solutions | FedEx vs. Ameriprise Financial | FedEx vs. Grupo Hotelero Santa |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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