Correlation Between United Parcel and Pet Center

Can any of the company-specific risk be diversified away by investing in both United Parcel and Pet Center 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 Pet Center 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 Pet Center Comrcio, you can compare the effects of market volatilities on United Parcel and Pet Center 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 Pet Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Pet Center.

Diversification Opportunities for United Parcel and Pet Center

0.48

Correlation Coefficient

United Parcel  Pet Center

Very weak diversification

The 3 months correlation between United and Pet is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Pet Center Comrcio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Center Comrcio 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 Pet Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Center Comrcio has no effect on the direction of United Parcel i.e., United Parcel and Pet Center go up and down completely randomly.

Pair Corralation between United Parcel and Pet Center

Assuming the 90 days trading horizon United Parcel is expected to generate 9.11 times less return on investment than Pet Center. But when comparing it to its historical volatility, United Parcel Service is 8.81 times less risky than Pet Center. It trades about 0.11 of its potential returns per unit of risk. Pet Center Comrcio is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  413.00  in Pet Center Comrcio on January 30, 2024 and sell it today you would earn a total of  70.00  from holding Pet Center Comrcio or generate 16.95% return on investment over 90 days.

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

United Parcel Service  vs.  Pet Center Comrcio

United Parcel Service

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United Parcel may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pet Center Comrcio

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pet Center Comrcio are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pet Center unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Parcel and Pet Center

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

The idea behind United Parcel Service and Pet Center Comrcio 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.