Correlation Between United Parcel and GXO Logistics

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

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

Diversification Opportunities for United Parcel and GXO Logistics

0.44

Correlation Coefficient

United Parcel  GXO Logistics

Very weak diversification

The 3 months correlation between United and GXO is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and GXO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GXO Logistics and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and GXO Logistics go up and down completely randomly.

Pair Corralation between United Parcel and GXO Logistics

Considering the 90-day investment horizon United Parcel Service is expected to under-perform the GXO Logistics. But the stock apears to be less risky and, when comparing its historical volatility, United Parcel Service is 1.28 times less risky than GXO Logistics. The stock trades about -0.07 of its potential returns per unit of risk. The GXO Logistics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,280  in GXO Logistics on December 27, 2024 and sell it today you would lose (289.00) from holding GXO Logistics or give up 6.75% of portfolio value over 90 days.

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

United Parcel Service  vs.  GXO Logistics

United Parcel Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

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 United Parcel and GXO Logistics

The main advantage of trading using opposite United Parcel and GXO Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 United Parcel Service 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..