Correlation Between Deutsche Post and United Parcel

Can any of the company-specific risk be diversified away by investing in both Deutsche Post 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 Deutsche Post and United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deutsche Post AG and United Parcel Service, you can compare the effects of market volatilities on Deutsche Post 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 Deutsche Post with a short position of United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Post and United Parcel.

Diversification Opportunities for Deutsche Post and United Parcel

-0.11

Correlation Coefficient

Deutsche Post  United Parcel

Good diversification

The 3 months correlation between Deutsche and United is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Post AG 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 Deutsche Post 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 Deutsche Post AG 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 Deutsche Post i.e., Deutsche Post and United Parcel go up and down completely randomly.

Pair Corralation between Deutsche Post and United Parcel

Assuming the 90 days horizon Deutsche Post AG is expected to under-perform the United Parcel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Deutsche Post AG is 1.08 times less risky than United Parcel. The pink sheet trades about -0.13 of its potential returns per unit of risk. The United Parcel Service is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14,863  in United Parcel Service on January 28, 2024 and sell it today you would lose (104.00) from holding United Parcel Service or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Deutsche Post AG  vs.  United Parcel Service

Deutsche Post AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Post AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United Parcel Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Deutsche Post and United Parcel

The main advantage of trading using opposite Deutsche Post and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Post 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.

The idea behind Deutsche Post AG and United Parcel Service 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..