Correlation Between Analog Devices and FEDEX

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

By analyzing existing cross correlation between Analog Devices and FEDEX P 42, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and FEDEX.

Diversification Opportunities for Analog Devices and FEDEX

0.08

Correlation Coefficient

Analog Devices  FEDEX

Significant diversification

The 3 months correlation between Analog and FEDEX is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and FEDEX P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 42 and Analog Devices 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 Analog Devices 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 P 42 has no effect on the direction of Analog Devices i.e., Analog Devices and FEDEX go up and down completely randomly.

Pair Corralation between Analog Devices and FEDEX

Considering the 90-day investment horizon Analog Devices is expected to generate 2.62 times more return on investment than FEDEX. However, Analog Devices is 2.62 times more volatile than FEDEX P 42. It trades about 0.03 of its potential returns per unit of risk. FEDEX P 42 is currently generating about -0.15 per unit of risk. If you would invest  21,012  in Analog Devices on September 21, 2024 and sell it today you would earn a total of  202.00  from holding Analog Devices or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Analog Devices  vs.  FEDEX P 42

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

FEDEX P 42

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and FEDEX

The main advantage of trading using opposite Analog Devices and FEDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices and FEDEX P 42 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.