Correlation Between Expeditors International and United Parcel

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

By analyzing existing cross correlation between Expeditors International of and United Parcel Service, you can compare the effects of market volatilities on Expeditors International and United Parcel 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 Expeditors International with a short position of United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expeditors International and United Parcel.

Diversification Opportunities for Expeditors International and United Parcel

-0.15

Correlation Coefficient

Expeditors International  United Parcel

Good diversification

The 3 months correlation between Expeditors and United is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Expeditors International of and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service and Expeditors International 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 Expeditors International of are associated (or correlated) with United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Expeditors International i.e., Expeditors International and United Parcel go up and down completely randomly.

Pair Corralation between Expeditors International and United Parcel

Given the investment horizon of 90 days Expeditors International of is expected to under-perform the United Parcel. But the stock apears to be less risky and, when comparing its historical volatility, Expeditors International of is 1.19 times less risky than United Parcel. The stock trades about -0.02 of its potential returns per unit of risk. The United Parcel Service is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,595  in United Parcel Service on August 31, 2024 and sell it today you would earn a total of  979.00  from holding United Parcel Service or generate 7.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Expeditors International of  vs.  United Parcel Service

Expeditors International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expeditors International of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Expeditors International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

United Parcel Service

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, United Parcel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Expeditors International and United Parcel

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

The idea behind Expeditors International of and United Parcel Service 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.