Correlation Between United Parcel and Freightos Limited

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

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

Diversification Opportunities for United Parcel and Freightos Limited

0.22

Correlation Coefficient

United Parcel  Freightos Limited

Modest diversification

The 3 months correlation between United and Freightos is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Freightos Limited Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightos Limited and United Parcel 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 United Parcel Service are associated (or correlated) with Freightos Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freightos Limited has no effect on the direction of United Parcel i.e., United Parcel and Freightos Limited go up and down completely randomly.

Pair Corralation between United Parcel and Freightos Limited

Considering the 90-day investment horizon United Parcel is expected to generate 13.1 times less return on investment than Freightos Limited. But when comparing it to its historical volatility, United Parcel Service is 5.2 times less risky than Freightos Limited. It trades about 0.03 of its potential returns per unit of risk. Freightos Limited Ordinary is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  154.00  in Freightos Limited Ordinary on September 4, 2024 and sell it today you would earn a total of  27.00  from holding Freightos Limited Ordinary or generate 17.53% return on investment over 90 days.

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

United Parcel Service  vs.  Freightos Limited Ordinary

United Parcel Service

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Freightos Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freightos Limited Ordinary are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Freightos Limited displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Parcel and Freightos Limited

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

The idea behind United Parcel Service and Freightos Limited Ordinary 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.