Correlation Between FedEx and VeriSign

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

By analyzing existing cross correlation between FedEx and VeriSign, you can compare the effects of market volatilities on FedEx and VeriSign 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 VeriSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of FedEx and VeriSign.

Diversification Opportunities for FedEx and VeriSign

-0.14

Correlation Coefficient

FedEx  VeriSign

Good diversification

The 3 months correlation between FedEx and VeriSign is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding FedEx and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of FedEx i.e., FedEx and VeriSign go up and down completely randomly.

Pair Corralation between FedEx and VeriSign

Considering the 90-day investment horizon FedEx is expected to under-perform the VeriSign. In addition to that, FedEx is 1.08 times more volatile than VeriSign. It trades about -0.06 of its total potential returns per unit of risk. VeriSign is currently generating about 0.24 per unit of volatility. If you would invest  20,053  in VeriSign on October 11, 2024 and sell it today you would earn a total of  1,114  from holding VeriSign or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

FedEx  vs.  VeriSign

FedEx

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 4 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

VeriSign

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, VeriSign displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FedEx and VeriSign

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

The idea behind FedEx and VeriSign 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.