Correlation Between United Parcel and Biomm SA

Can any of the company-specific risk be diversified away by investing in both United Parcel and Biomm SA 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 Biomm SA 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 Biomm SA, you can compare the effects of market volatilities on United Parcel and Biomm SA 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 Biomm SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Biomm SA.

Diversification Opportunities for United Parcel and Biomm SA

-0.3

Correlation Coefficient

United Parcel  Biomm SA

Very good diversification

The 3 months correlation between United and Biomm is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Biomm SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomm SA 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 Biomm SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomm SA has no effect on the direction of United Parcel i.e., United Parcel and Biomm SA go up and down completely randomly.

Pair Corralation between United Parcel and Biomm SA

Assuming the 90 days trading horizon United Parcel Service is expected to under-perform the Biomm SA. But the stock apears to be less risky and, when comparing its historical volatility, United Parcel Service is 1.36 times less risky than Biomm SA. The stock trades about -0.11 of its potential returns per unit of risk. The Biomm SA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,066  in Biomm SA on December 30, 2024 and sell it today you would lose (97.00) from holding Biomm SA or give up 9.1% of portfolio value over 90 days.

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

United Parcel Service  vs.  Biomm SA

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Biomm SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biomm SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Biomm SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Parcel and Biomm SA

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

The idea behind United Parcel Service and Biomm SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.