Correlation Between Shengfeng Development and FedEx

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

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

Diversification Opportunities for Shengfeng Development and FedEx

0.48

Correlation Coefficient

Shengfeng Development  FedEx

Very weak diversification

The 3 months correlation between Shengfeng and FedEx is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Shengfeng Development Limited and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Shengfeng Development 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 Shengfeng Development Limited 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 Shengfeng Development i.e., Shengfeng Development and FedEx go up and down completely randomly.

Pair Corralation between Shengfeng Development and FedEx

Given the investment horizon of 90 days Shengfeng Development Limited is expected to generate 0.98 times more return on investment than FedEx. However, Shengfeng Development Limited is 1.02 times less risky than FedEx. It trades about -0.02 of its potential returns per unit of risk. FedEx is currently generating about -0.11 per unit of risk. If you would invest  102.00  in Shengfeng Development Limited on December 29, 2024 and sell it today you would lose (4.00) from holding Shengfeng Development Limited or give up 3.92% of portfolio value over 90 days.

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

Shengfeng Development Limited  vs.  FedEx

Shengfeng Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shengfeng Development Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shengfeng Development 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

Very Weak

Over the last 90 days FedEx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shengfeng Development and FedEx

The main advantage of trading using opposite Shengfeng Development and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shengfeng Development 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 Shengfeng Development Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.