Correlation Between Greenbrier Companies and Union Pacific

Can any of the company-specific risk be diversified away by investing in both Greenbrier Companies and Union Pacific 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 Greenbrier Companies and Union Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Greenbrier Companies and Union Pacific, you can compare the effects of market volatilities on Greenbrier Companies and Union Pacific 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 Greenbrier Companies with a short position of Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greenbrier Companies and Union Pacific.

Diversification Opportunities for Greenbrier Companies and Union Pacific

-0.54

Correlation Coefficient

Greenbrier Companies  Union Pacific

Excellent diversification

The 3 months correlation between Greenbrier and Union is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Greenbrier Companies and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific and Greenbrier Companies 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 Greenbrier Companies are associated (or correlated) with Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Greenbrier Companies i.e., Greenbrier Companies and Union Pacific go up and down completely randomly.

Pair Corralation between Greenbrier Companies and Union Pacific

Considering the 90-day investment horizon Greenbrier Companies is expected to generate 1.78 times more return on investment than Union Pacific. However, Greenbrier Companies is 1.78 times more volatile than Union Pacific. It trades about 0.24 of its potential returns per unit of risk. Union Pacific is currently generating about -0.04 per unit of risk. If you would invest  4,710  in Greenbrier Companies on September 1, 2024 and sell it today you would earn a total of  2,090  from holding Greenbrier Companies or generate 44.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Greenbrier Companies  vs.  Union Pacific

Greenbrier Companies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Greenbrier Companies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Greenbrier Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Union Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Union Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Greenbrier Companies and Union Pacific

The main advantage of trading using opposite Greenbrier Companies and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greenbrier Companies position performs unexpectedly, Union Pacific 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 Union Pacific will offset losses from the drop in Union Pacific's long position.

The idea behind Greenbrier Companies and Union Pacific pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.