Correlation Between Trinity Industries and Freightcar America
Can any of the company-specific risk be diversified away by investing in both Trinity Industries and Freightcar America 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 Freightcar America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trinity Industries and Freightcar America, you can compare the effects of market volatilities on Trinity Industries and Freightcar America 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 Freightcar America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trinity Industries and Freightcar America.
Diversification Opportunities for Trinity Industries and Freightcar America
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trinity and Freightcar is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries and Freightcar America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightcar America 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 Freightcar America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freightcar America has no effect on the direction of Trinity Industries i.e., Trinity Industries and Freightcar America go up and down completely randomly.
Pair Corralation between Trinity Industries and Freightcar America
Considering the 90-day investment horizon Trinity Industries is expected to generate 0.29 times more return on investment than Freightcar America. However, Trinity Industries is 3.48 times less risky than Freightcar America. It trades about 0.12 of its potential returns per unit of risk. Freightcar America is currently generating about -0.07 per unit of risk. If you would invest 3,478 in Trinity Industries on August 23, 2024 and sell it today you would earn a total of 239.00 from holding Trinity Industries or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trinity Industries vs. Freightcar America
Performance |
| Timeline |
| Trinity Industries |
| Freightcar America |
Trinity Industries and Freightcar America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trinity Industries and Freightcar America
The main advantage of trading using opposite Trinity Industries and Freightcar America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries position performs unexpectedly, Freightcar America 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 Freightcar America will offset losses from the drop in Freightcar America's long position.| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
| Freightcar America vs. Greenbrier Companies | Freightcar America vs. LB Foster | Freightcar America vs. Westinghouse Air Brake | Freightcar America vs. CSX Corporation |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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