Correlation Between Union Pacific and STRA Hannoversche

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

By analyzing existing cross correlation between Union Pacific and STRA Hannoversche Verkehrsbetriebe, you can compare the effects of market volatilities on Union Pacific and STRA Hannoversche 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 STRA Hannoversche. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Pacific and STRA Hannoversche.

Diversification Opportunities for Union Pacific and STRA Hannoversche

-0.48

Correlation Coefficient

Union Pacific  STRA Hannoversche

Very good diversification

The 3 months correlation between Union and STRA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and STRA Hannoversche Verkehrsbetr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRA Hannoversche 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 STRA Hannoversche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRA Hannoversche has no effect on the direction of Union Pacific i.e., Union Pacific and STRA Hannoversche go up and down completely randomly.

Pair Corralation between Union Pacific and STRA Hannoversche

Assuming the 90 days horizon Union Pacific is expected to under-perform the STRA Hannoversche. In addition to that, Union Pacific is 1.43 times more volatile than STRA Hannoversche Verkehrsbetriebe. It trades about -0.27 of its total potential returns per unit of risk. STRA Hannoversche Verkehrsbetriebe is currently generating about 0.22 per unit of volatility. If you would invest  940.00  in STRA Hannoversche Verkehrsbetriebe on September 25, 2024 and sell it today you would earn a total of  30.00  from holding STRA Hannoversche Verkehrsbetriebe or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Union Pacific  vs.  STRA Hannoversche Verkehrsbetr

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. Despite nearly stable basic indicators, Union Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

STRA Hannoversche

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRA Hannoversche Verkehrsbetriebe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STRA Hannoversche is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Union Pacific and STRA Hannoversche

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

The idea behind Union Pacific and STRA Hannoversche Verkehrsbetriebe 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.