Correlation Between Union Pacific and Air Transport
Can any of the company-specific risk be diversified away by investing in both Union Pacific and Air Transport 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 Union Pacific and Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Pacific and Air Transport Services, you can compare the effects of market volatilities on Union Pacific and Air Transport 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 Union Pacific with a short position of Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Pacific and Air Transport.
Diversification Opportunities for Union Pacific and Air Transport
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Union and Air is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services and Union Pacific 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 Union Pacific are associated (or correlated) with Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Union Pacific i.e., Union Pacific and Air Transport go up and down completely randomly.
Pair Corralation between Union Pacific and Air Transport
Considering the 90-day investment horizon Union Pacific is expected to generate 3.62 times less return on investment than Air Transport. But when comparing it to its historical volatility, Union Pacific is 3.11 times less risky than Air Transport. It trades about 0.19 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,720 in Air Transport Services on August 28, 2024 and sell it today you would earn a total of 475.00 from holding Air Transport Services or generate 27.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Pacific vs. Air Transport Services
Performance |
| Timeline |
| Union Pacific |
| Air Transport Services |
Union Pacific and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Pacific and Air Transport
The main advantage of trading using opposite Union Pacific and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Pacific position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.| Union Pacific vs. Norfolk Southern | Union Pacific vs. CSX Corporation | Union Pacific vs. United Parcel Service | Union Pacific vs. Canadian National Railway |
| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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