Correlation Between Pitney Bowes and GXO Logistics

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

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

Diversification Opportunities for Pitney Bowes and GXO Logistics

-0.65

Correlation Coefficient

Pitney Bowes  GXO Logistics

Excellent diversification

The 3 months correlation between Pitney and GXO is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pitney Bowes and GXO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GXO Logistics and Pitney Bowes 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 Pitney Bowes are associated (or correlated) with GXO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GXO Logistics has no effect on the direction of Pitney Bowes i.e., Pitney Bowes and GXO Logistics go up and down completely randomly.

Pair Corralation between Pitney Bowes and GXO Logistics

Considering the 90-day investment horizon Pitney Bowes is expected to generate 1.13 times more return on investment than GXO Logistics. However, Pitney Bowes is 1.13 times more volatile than GXO Logistics. It trades about 0.15 of its potential returns per unit of risk. GXO Logistics is currently generating about -0.02 per unit of risk. If you would invest  725.00  in Pitney Bowes on December 27, 2024 and sell it today you would earn a total of  225.00  from holding Pitney Bowes or generate 31.03% return on investment over 90 days.

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

Pitney Bowes  vs.  GXO Logistics

Pitney Bowes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pitney Bowes are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Pitney Bowes demonstrated solid returns over the last few months and may actually be approaching a breakup point.

GXO Logistics

Risk-Adjusted Performance

Very Weak

Over the last 90 days GXO Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, GXO Logistics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pitney Bowes and GXO Logistics

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

The idea behind Pitney Bowes and GXO Logistics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.