Correlation Between Union Pacific and Freightcar America
Can any of the company-specific risk be diversified away by investing in both Union Pacific 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 Union Pacific and Freightcar America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Pacific and Freightcar America, you can compare the effects of market volatilities on Union Pacific 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 Union Pacific with a short position of Freightcar America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Pacific and Freightcar America.
Diversification Opportunities for Union Pacific and Freightcar America
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Union and Freightcar is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and Freightcar America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightcar America 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 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 Union Pacific i.e., Union Pacific and Freightcar America go up and down completely randomly.
Pair Corralation between Union Pacific and Freightcar America
Considering the 90-day investment horizon Union Pacific is expected to generate 15.34 times less return on investment than Freightcar America. But when comparing it to its historical volatility, Union Pacific is 4.22 times less risky than Freightcar America. It trades about 0.04 of its potential returns per unit of risk. Freightcar America is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 234.00 in Freightcar America on August 26, 2024 and sell it today you would earn a total of 711.00 from holding Freightcar America or generate 303.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Pacific vs. Freightcar America
Performance |
| Timeline |
| Union Pacific |
| Freightcar America |
Union Pacific and Freightcar America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Pacific and Freightcar America
The main advantage of trading using opposite Union Pacific and Freightcar America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Pacific 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.| Union Pacific vs. Norfolk Southern | Union Pacific vs. CSX Corporation | Union Pacific vs. United Parcel Service | Union Pacific vs. Canadian National Railway |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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