Correlation Between Freightos Limited and Royal Mail

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

By analyzing existing cross correlation between Freightos Limited Ordinary and Royal Mail PLC, you can compare the effects of market volatilities on Freightos Limited and Royal Mail 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 Freightos Limited with a short position of Royal Mail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freightos Limited and Royal Mail.

Diversification Opportunities for Freightos Limited and Royal Mail

-0.52

Correlation Coefficient

Freightos Limited  Royal Mail

Excellent diversification

The 3 months correlation between Freightos and Royal is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Freightos Limited Ordinary and Royal Mail PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Mail PLC and Freightos Limited 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 Freightos Limited Ordinary are associated (or correlated) with Royal Mail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Mail PLC has no effect on the direction of Freightos Limited i.e., Freightos Limited and Royal Mail go up and down completely randomly.

Pair Corralation between Freightos Limited and Royal Mail

Given the investment horizon of 90 days Freightos Limited Ordinary is expected to generate 10.39 times more return on investment than Royal Mail. However, Freightos Limited is 10.39 times more volatile than Royal Mail PLC. It trades about 0.09 of its potential returns per unit of risk. Royal Mail PLC is currently generating about -0.01 per unit of risk. If you would invest  157.00  in Freightos Limited Ordinary on September 3, 2024 and sell it today you would earn a total of  50.00  from holding Freightos Limited Ordinary or generate 31.85% return on investment over 90 days.

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

Freightos Limited Ordinary  vs.  Royal Mail PLC

Freightos Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freightos Limited Ordinary are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Freightos Limited displayed solid returns over the last few months and may actually be approaching a breakup point.

Royal Mail PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Mail PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Royal Mail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Freightos Limited and Royal Mail

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

The idea behind Freightos Limited Ordinary and Royal Mail PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.