Correlation Between FEDEX and Royalty Management

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

By analyzing existing cross correlation between FEDEX P 495 and Royalty Management Holding, you can compare the effects of market volatilities on FEDEX and Royalty Management 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 FEDEX with a short position of Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of FEDEX and Royalty Management.

Diversification Opportunities for FEDEX and Royalty Management

0.11

Correlation Coefficient

FEDEX  Royalty Management

Average diversification

The 3 months correlation between FEDEX and Royalty is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding FEDEX P 495 and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management and FEDEX 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 FEDEX P 495 are associated (or correlated) with Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of FEDEX i.e., FEDEX and Royalty Management go up and down completely randomly.

Pair Corralation between FEDEX and Royalty Management

Assuming the 90 days trading horizon FEDEX P 495 is expected to under-perform the Royalty Management. But the bond apears to be less risky and, when comparing its historical volatility, FEDEX P 495 is 2.44 times less risky than Royalty Management. The bond trades about -0.04 of its potential returns per unit of risk. The Royalty Management Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Royalty Management Holding on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Royalty Management Holding or generate 9.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.33%
Values	Daily Returns

FEDEX P 495  vs.  Royalty Management Holding

FEDEX P 495

Risk-Adjusted Performance

Very Weak

Over the last 90 days FEDEX P 495 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Royalty Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FEDEX and Royalty Management

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

The idea behind FEDEX P 495 and Royalty Management Holding 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.