Correlation Between Hub and FedEx

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

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

Diversification Opportunities for Hub and FedEx

-0.62

Correlation Coefficient

Hub  FedEx

Excellent diversification

The 3 months correlation between Hub and FedEx is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hub Group and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Hub 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 Hub Group 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 Hub i.e., Hub and FedEx go up and down completely randomly.

Pair Corralation between Hub and FedEx

Given the investment horizon of 90 days Hub Group is expected to generate 1.71 times more return on investment than FedEx. However, Hub is 1.71 times more volatile than FedEx. It trades about 0.08 of its potential returns per unit of risk. FedEx is currently generating about -0.21 per unit of risk. If you would invest  4,116  in Hub Group on February 2, 2024 and sell it today you would earn a total of  112.00  from holding Hub Group or generate 2.72% return on investment over 90 days.

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

Hub Group  vs.  FedEx

Hub Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

FedEx

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, FedEx may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Hub and FedEx

The main advantage of trading using opposite Hub and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hub 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 Hub Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.