Correlation Between Erie Indemnity and United Parcel
Can any of the company-specific risk be diversified away by investing in both Erie Indemnity 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 Erie Indemnity and United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erie Indemnity and United Parcel Service, you can compare the effects of market volatilities on Erie Indemnity 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 Erie Indemnity with a short position of United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and United Parcel.
Diversification Opportunities for Erie Indemnity and United Parcel
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Erie and United is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity 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 Erie Indemnity 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 Erie Indemnity 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 Erie Indemnity i.e., Erie Indemnity and United Parcel go up and down completely randomly.
Pair Corralation between Erie Indemnity and United Parcel
Given the investment horizon of 90 days Erie Indemnity is expected to under-perform the United Parcel. But the stock apears to be less risky and, when comparing its historical volatility, Erie Indemnity is 1.72 times less risky than United Parcel. The stock trades about -0.3 of its potential returns per unit of risk. The United Parcel Service is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 14,379 in United Parcel Service on January 26, 2024 and sell it today you would earn a total of 283.00 from holding United Parcel Service or generate 1.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erie Indemnity vs. United Parcel Service
Performance |
| Timeline |
| Erie Indemnity |
| United Parcel Service |
Erie Indemnity and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erie Indemnity and United Parcel
The main advantage of trading using opposite Erie Indemnity and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erie Indemnity 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.| Erie Indemnity vs. CorVel Corp | Erie Indemnity vs. Huize HoldingLtd | Erie Indemnity vs. Crawford Company | Erie Indemnity vs. eHealth |
| United Parcel vs. GXO Logistics | United Parcel vs. JB Hunt Transport | United Parcel vs. Expeditors International of | United Parcel vs. CH Robinson Worldwide |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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