Correlation Between Suntory Beverage and FedEx

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

By analyzing existing cross correlation between Suntory Beverage Food and FedEx, you can compare the effects of market volatilities on Suntory Beverage 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 Suntory Beverage with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suntory Beverage and FedEx.

Diversification Opportunities for Suntory Beverage and FedEx

-0.25

Correlation Coefficient

Suntory Beverage  FedEx

Very good diversification

The 3 months correlation between Suntory and FedEx is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Suntory Beverage Food and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Suntory Beverage 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 Suntory Beverage Food 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 Suntory Beverage i.e., Suntory Beverage and FedEx go up and down completely randomly.

Pair Corralation between Suntory Beverage and FedEx

Assuming the 90 days horizon Suntory Beverage Food is expected to under-perform the FedEx. But the stock apears to be less risky and, when comparing its historical volatility, Suntory Beverage Food is 1.17 times less risky than FedEx. The stock trades about -0.24 of its potential returns per unit of risk. The FedEx is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  26,759  in FedEx on October 5, 2024 and sell it today you would earn a total of  436.00  from holding FedEx or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Suntory Beverage Food  vs.  FedEx

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

FedEx

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, FedEx reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suntory Beverage and FedEx

The main advantage of trading using opposite Suntory Beverage and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suntory Beverage 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.

The idea behind Suntory Beverage Food and FedEx 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.