Correlation Between ZTO Express and United Parcel

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Can any of the company-specific risk be diversified away by investing in both ZTO Express and United Parcel 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 United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZTO Express and United Parcel Service, you can compare the effects of market volatilities on ZTO Express and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZTO Express and United Parcel.

Diversification Opportunities for ZTO Express and United Parcel

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between ZTO and United is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ZTO Express and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of ZTO Express i.e., ZTO Express and United Parcel go up and down completely randomly.

Pair Corralation between ZTO Express and United Parcel

Assuming the 90 days trading horizon ZTO Express is expected to generate 1.69 times more return on investment than United Parcel. However, ZTO Express is 1.69 times more volatile than United Parcel Service. It trades about 0.05 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.17 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 Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ZTO Express  vs.  United Parcel Service

 Performance 
       Timeline  
ZTO Express 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
United Parcel Service 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Parcel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ZTO Express and United Parcel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ZTO Express and United Parcel

The main advantage of trading using opposite ZTO Express and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTO Express position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.
The idea behind ZTO Express and United Parcel Service 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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