Correlation Between AP Møller and FedEx

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

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

Diversification Opportunities for AP Møller and FedEx

0.69

Correlation Coefficient

AP Møller  FedEx

Poor diversification

The 3 months correlation between DP4B and FedEx is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and AP Møller 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 AP Mller 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 AP Møller i.e., AP Møller and FedEx go up and down completely randomly.

Pair Corralation between AP Møller and FedEx

Assuming the 90 days trading horizon AP Mller is expected to generate 1.61 times more return on investment than FedEx. However, AP Møller is 1.61 times more volatile than FedEx. It trades about 0.06 of its potential returns per unit of risk. FedEx is currently generating about 0.07 per unit of risk. If you would invest  162,400  in AP Mller on October 5, 2024 and sell it today you would earn a total of  3,400  from holding AP Mller or generate 2.09% return on investment over 90 days.

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

AP Mller   vs.  FedEx

AP Møller

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days AP Mller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

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 AP Møller and FedEx

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

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.