Correlation Between FedEx and Landstar System

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Can any of the company-specific risk be diversified away by investing in both FedEx and Landstar System 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 FedEx and Landstar System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FedEx and Landstar System, you can compare the effects of market volatilities on FedEx and Landstar System 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 FedEx with a short position of Landstar System. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and Landstar System.

Diversification Opportunities for FedEx and Landstar System

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between FedEx and Landstar is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and Landstar System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landstar System and FedEx 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 FedEx are associated (or correlated) with Landstar System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landstar System has no effect on the direction of FedEx i.e., FedEx and Landstar System go up and down completely randomly.

Pair Corralation between FedEx and Landstar System

Considering the 90-day investment horizon FedEx is expected to generate 1.99 times less return on investment than Landstar System. In addition to that, FedEx is 1.48 times more volatile than Landstar System. It trades about 0.02 of its total potential returns per unit of risk. Landstar System is currently generating about 0.05 per unit of volatility. If you would invest  17,967  in Landstar System on September 6, 2024 and sell it today you would earn a total of  764.00  from holding Landstar System or generate 4.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FedEx  vs.  Landstar System

 Performance 
       Timeline  
FedEx 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, FedEx is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Landstar System 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Landstar System are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Landstar System is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

FedEx and Landstar System Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FedEx and Landstar System

The main advantage of trading using opposite FedEx and Landstar System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FedEx position performs unexpectedly, Landstar System 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 Landstar System will offset losses from the drop in Landstar System's long position.
The idea behind FedEx and Landstar System 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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