Correlation Between Union Electric and TFI International

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

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

Diversification Opportunities for Union Electric and TFI International

0.43

Correlation Coefficient

Union Electric  TFI International

Very weak diversification

The 3 months correlation between Union and TFI is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Union Electric and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International and Union Electric 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 Electric are associated (or correlated) with TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Union Electric i.e., Union Electric and TFI International go up and down completely randomly.

Pair Corralation between Union Electric and TFI International

Assuming the 90 days horizon Union Electric is expected to generate 2.34 times more return on investment than TFI International. However, Union Electric is 2.34 times more volatile than TFI International. It trades about 0.18 of its potential returns per unit of risk. TFI International is currently generating about 0.19 per unit of risk. If you would invest  10,000  in Union Electric on September 15, 2024 and sell it today you would earn a total of  1,000.00  from holding Union Electric or generate 10.0% return on investment over 90 days.

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

Union Electric  vs.  TFI International

Union Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Union Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TFI International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, TFI International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Union Electric and TFI International

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

The idea behind Union Electric and TFI International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.