Correlation Between FedEx and Hidrovias

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

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

Diversification Opportunities for FedEx and Hidrovias

-0.67

Correlation Coefficient

FedEx  Hidrovias

Excellent diversification

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

Pair Corralation between FedEx and Hidrovias

Assuming the 90 days trading horizon FedEx is expected to generate 0.45 times more return on investment than Hidrovias. However, FedEx is 2.2 times less risky than Hidrovias. It trades about 0.09 of its potential returns per unit of risk. Hidrovias do Brasil is currently generating about -0.04 per unit of risk. If you would invest  153,497  in FedEx on October 20, 2024 and sell it today you would earn a total of  12,371  from holding FedEx or generate 8.06% return on investment over 90 days.

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

FedEx  vs.  Hidrovias do Brasil

FedEx

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, FedEx may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hidrovias do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hidrovias do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with FedEx and Hidrovias

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

The idea behind FedEx and Hidrovias do Brasil 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.