Correlation Between Trinity Industries and East Japan
Can any of the company-specific risk be diversified away by investing in both Trinity Industries and East Japan 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 Trinity Industries and East Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trinity Industries and East Japan Railway, you can compare the effects of market volatilities on Trinity Industries and East Japan 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 Trinity Industries with a short position of East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trinity Industries and East Japan.
Diversification Opportunities for Trinity Industries and East Japan
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Trinity and East is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway and Trinity Industries 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 Trinity Industries are associated (or correlated) with East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of Trinity Industries i.e., Trinity Industries and East Japan go up and down completely randomly.
Pair Corralation between Trinity Industries and East Japan
Considering the 90-day investment horizon Trinity Industries is expected to generate 1.43 times more return on investment than East Japan. However, Trinity Industries is 1.43 times more volatile than East Japan Railway. It trades about 0.12 of its potential returns per unit of risk. East Japan Railway is currently generating about 0.0 per unit of risk. If you would invest 2,557 in Trinity Industries on August 28, 2024 and sell it today you would earn a total of 1,211 from holding Trinity Industries or generate 47.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trinity Industries vs. East Japan Railway
Performance |
| Timeline |
| Trinity Industries |
| East Japan Railway |
Trinity Industries and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trinity Industries and East Japan
The main advantage of trading using opposite Trinity Industries and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries position performs unexpectedly, East Japan 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 East Japan will offset losses from the drop in East Japan's long position.| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
| East Japan vs. Central Japan Railway | East Japan vs. LB Foster | East Japan vs. Canadian National Railway | East Japan vs. West Japan Railway |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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