Correlation Between FedEx and Alphabet
Can any of the company-specific risk be diversified away by investing in both FedEx and Alphabet 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 Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FedEx and Alphabet Inc Class C, you can compare the effects of market volatilities on FedEx and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and Alphabet.
Diversification Opportunities for FedEx and Alphabet
Poor diversification
The 3 months correlation between FedEx and Alphabet is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of FedEx i.e., FedEx and Alphabet go up and down completely randomly.
Pair Corralation between FedEx and Alphabet
Considering the 90-day investment horizon FedEx is expected to generate 1.62 times more return on investment than Alphabet. However, FedEx is 1.62 times more volatile than Alphabet Inc Class C. It trades about 0.13 of its potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.2 per unit of risk. If you would invest 25,318 in FedEx on January 16, 2024 and sell it today you would earn a total of 1,356 from holding FedEx or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FedEx vs. Alphabet Inc Class C
Performance |
| Timeline |
| FedEx |
| Alphabet Class C |
FedEx and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FedEx and Alphabet
The main advantage of trading using opposite FedEx and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.| FedEx vs. Aquagold International | FedEx vs. Via Renewables | FedEx vs. T Rowe Price | FedEx vs. Oshidori International Holdings |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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