Correlation Between BRIT AMER and FedEx Corp

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

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

Diversification Opportunities for BRIT AMER and FedEx Corp

0.67

Correlation Coefficient

BRIT AMER  FedEx Corp

Poor diversification

The 3 months correlation between BRIT and FedEx is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and FedEx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx Corp and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with FedEx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx Corp has no effect on the direction of BRIT AMER i.e., BRIT AMER and FedEx Corp go up and down completely randomly.

Pair Corralation between BRIT AMER and FedEx Corp

Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.59 times more return on investment than FedEx Corp. However, BRIT AMER TOBACCO is 1.7 times less risky than FedEx Corp. It trades about 0.09 of its potential returns per unit of risk. FedEx Corp is currently generating about 0.03 per unit of risk. If you would invest  2,610  in BRIT AMER TOBACCO on October 27, 2024 and sell it today you would earn a total of  984.00  from holding BRIT AMER TOBACCO or generate 37.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

BRIT AMER TOBACCO  vs.  FedEx Corp

BRIT AMER TOBACCO

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BRIT AMER unveiled solid returns over the last few months and may actually be approaching a breakup point.

FedEx Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, FedEx Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BRIT AMER and FedEx Corp

The main advantage of trading using opposite BRIT AMER and FedEx Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, FedEx Corp 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 Corp will offset losses from the drop in FedEx Corp's long position.

The idea behind BRIT AMER TOBACCO and FedEx Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.