Correlation Between Controladora Vuela and FedEx

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

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

Diversification Opportunities for Controladora Vuela and FedEx

0.74

Correlation Coefficient

Controladora Vuela  FedEx

Poor diversification

The 3 months correlation between Controladora and FedEx is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Controladora Vuela Compaa and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Controladora Vuela 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 Controladora Vuela Compaa 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 Controladora Vuela i.e., Controladora Vuela and FedEx go up and down completely randomly.

Pair Corralation between Controladora Vuela and FedEx

Assuming the 90 days trading horizon Controladora Vuela is expected to generate 3.39 times less return on investment than FedEx. In addition to that, Controladora Vuela is 1.36 times more volatile than FedEx. It trades about 0.01 of its total potential returns per unit of risk. FedEx is currently generating about 0.07 per unit of volatility. If you would invest  325,891  in FedEx on September 20, 2024 and sell it today you would earn a total of  238,809  from holding FedEx or generate 73.28% return on investment over 90 days.

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

Controladora Vuela Compaa  vs.  FedEx

Controladora Vuela Compaa

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Controladora Vuela sustained solid returns over the last few months and may actually be approaching a breakup point.

FedEx

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, FedEx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Controladora Vuela and FedEx

The main advantage of trading using opposite Controladora Vuela and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Controladora Vuela 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 Controladora Vuela Compaa 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.