Correlation Between United Parcel and Danaher

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

Diversification Opportunities for United Parcel and Danaher

-0.61

Correlation Coefficient

United Parcel  Danaher

Excellent diversification

The 3 months correlation between United and Danaher is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of United Parcel i.e., United Parcel and Danaher go up and down completely randomly.

Pair Corralation between United Parcel and Danaher

Assuming the 90 days trading horizon United Parcel Service is expected to generate 0.79 times more return on investment than Danaher. However, United Parcel Service is 1.26 times less risky than Danaher. It trades about 0.14 of its potential returns per unit of risk. Danaher is currently generating about 0.0 per unit of risk. If you would invest  4,477  in United Parcel Service on September 4, 2024 and sell it today you would earn a total of  588.00  from holding United Parcel Service or generate 13.13% return on investment over 90 days.

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

United Parcel Service  vs.  Danaher

United Parcel Service

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Parcel sustained solid returns over the last few months and may actually be approaching a breakup point.

Danaher

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Danaher is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Parcel and Danaher

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

The idea behind United Parcel Service and Danaher 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.