Correlation Between Union Pacific and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Union Pacific and Westinghouse Air 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 Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Pacific and Westinghouse Air Brake, you can compare the effects of market volatilities on Union Pacific and Westinghouse Air 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 Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Pacific and Westinghouse Air.
Diversification Opportunities for Union Pacific and Westinghouse Air
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Union and Westinghouse is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of Union Pacific i.e., Union Pacific and Westinghouse Air go up and down completely randomly.
Pair Corralation between Union Pacific and Westinghouse Air
Considering the 90-day investment horizon Union Pacific is expected to generate 4.97 times less return on investment than Westinghouse Air. But when comparing it to its historical volatility, Union Pacific is 1.06 times less risky than Westinghouse Air. It trades about 0.04 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 11,599 in Westinghouse Air Brake on August 26, 2024 and sell it today you would earn a total of 8,316 from holding Westinghouse Air Brake or generate 71.7% 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. Westinghouse Air Brake
Performance |
| Timeline |
| Union Pacific |
| Westinghouse Air Brake |
Union Pacific and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Pacific and Westinghouse Air
The main advantage of trading using opposite Union Pacific and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Pacific position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air'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 |
| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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