Correlation Between Rockwell Automation and FedEx

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

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

Diversification Opportunities for Rockwell Automation and FedEx

0.56

Correlation Coefficient

Rockwell Automation  FedEx

Very weak diversification

The 3 months correlation between Rockwell and FedEx is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Automation and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Rockwell Automation 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 Rockwell Automation 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 Rockwell Automation i.e., Rockwell Automation and FedEx go up and down completely randomly.

Pair Corralation between Rockwell Automation and FedEx

Considering the 90-day investment horizon Rockwell Automation is expected to under-perform the FedEx. But the stock apears to be less risky and, when comparing its historical volatility, Rockwell Automation is 1.1 times less risky than FedEx. The stock trades about -0.21 of its potential returns per unit of risk. The FedEx is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  27,932  in FedEx on October 11, 2024 and sell it today you would lose (442.00) from holding FedEx or give up 1.58% of portfolio value over 90 days.

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

Rockwell Automation  vs.  FedEx

Rockwell Automation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Rockwell Automation is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Rockwell Automation and FedEx

The main advantage of trading using opposite Rockwell Automation and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwell Automation 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 Rockwell Automation 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..