Correlation Between ZTO Express and FedEx

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

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

Diversification Opportunities for ZTO Express and FedEx

-0.76

Correlation Coefficient

ZTO Express  FedEx

Pay attention - limited upside

The 3 months correlation between ZTO and FedEx is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding ZTO Express and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and ZTO Express 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 ZTO Express 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 ZTO Express i.e., ZTO Express and FedEx go up and down completely randomly.

Pair Corralation between ZTO Express and FedEx

Assuming the 90 days trading horizon ZTO Express is expected to generate 1.21 times more return on investment than FedEx. However, ZTO Express is 1.21 times more volatile than FedEx. It trades about 0.05 of its potential returns per unit of risk. FedEx is currently generating about -0.13 per unit of risk. If you would invest  1,830  in ZTO Express on September 23, 2024 and sell it today you would earn a total of  40.00  from holding ZTO Express or generate 2.19% return on investment over 90 days.

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

ZTO Express  vs.  FedEx

ZTO Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ZTO Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

FedEx

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with ZTO Express and FedEx

The main advantage of trading using opposite ZTO Express and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTO Express 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 ZTO Express 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..