Correlation Between Trane Technologies and FedEx

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

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

Diversification Opportunities for Trane Technologies and FedEx

0.57

Correlation Coefficient

Trane Technologies  FedEx

Very weak diversification

The 3 months correlation between Trane and FedEx is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Trane Technologies 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 Trane Technologies plc 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 Trane Technologies i.e., Trane Technologies and FedEx go up and down completely randomly.

Pair Corralation between Trane Technologies and FedEx

Assuming the 90 days trading horizon Trane Technologies plc is expected to under-perform the FedEx. In addition to that, Trane Technologies is 1.06 times more volatile than FedEx. It trades about -0.22 of its total potential returns per unit of risk. FedEx is currently generating about -0.02 per unit of volatility. If you would invest  168,816  in FedEx on October 11, 2024 and sell it today you would lose (979.00) from holding FedEx or give up 0.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Trane Technologies plc  vs.  FedEx

Trane Technologies plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trane Technologies sustained 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 somewhat weak basic indicators, FedEx sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trane Technologies and FedEx

The main advantage of trading using opposite Trane Technologies and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies 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 Trane Technologies plc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.