Correlation Between FedEx and Lennar
Can any of the company-specific risk be diversified away by investing in both FedEx and Lennar 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 Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FedEx and Lennar, you can compare the effects of market volatilities on FedEx and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and Lennar.
Diversification Opportunities for FedEx and Lennar
Very weak diversification
The 3 months correlation between FedEx and Lennar is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of FedEx i.e., FedEx and Lennar go up and down completely randomly.
Pair Corralation between FedEx and Lennar
Considering the 90-day investment horizon FedEx is expected to generate 2.28 times less return on investment than Lennar. In addition to that, FedEx is 1.03 times more volatile than Lennar. It trades about 0.04 of its total potential returns per unit of risk. Lennar is currently generating about 0.09 per unit of volatility. If you would invest 6,378 in Lennar on January 26, 2024 and sell it today you would earn a total of 7,791 from holding Lennar or generate 122.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FedEx vs. Lennar
Performance |
| Timeline |
| FedEx |
| Lennar |
FedEx and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FedEx and Lennar
The main advantage of trading using opposite FedEx and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| FedEx vs. GXO Logistics | FedEx vs. JB Hunt Transport | FedEx vs. Expeditors International of | FedEx vs. CH Robinson Worldwide |
| Lennar vs. Vertical Aerospace | Lennar vs. Rolls Royce Holdings plc | Lennar vs. Embraer SA ADR | Lennar vs. Rocket Lab USA |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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