Correlation Between Union Pacific and MTRLimited

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

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

Diversification Opportunities for Union Pacific and MTRLimited

-0.4

Correlation Coefficient

Union Pacific  MTRLimited

Very good diversification

The 3 months correlation between Union and MTRLimited is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and MTR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Limited 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 MTRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Limited has no effect on the direction of Union Pacific i.e., Union Pacific and MTRLimited go up and down completely randomly.

Pair Corralation between Union Pacific and MTRLimited

Assuming the 90 days horizon Union Pacific is expected to generate 5.29 times less return on investment than MTRLimited. In addition to that, Union Pacific is 1.03 times more volatile than MTR Limited. It trades about 0.01 of its total potential returns per unit of risk. MTR Limited is currently generating about 0.08 per unit of volatility. If you would invest  304.00  in MTR Limited on August 31, 2024 and sell it today you would earn a total of  22.00  from holding MTR Limited or generate 7.24% return on investment over 90 days.

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

Union Pacific  vs.  MTR Limited

Union Pacific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Pacific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

MTR Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MTR Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MTRLimited may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Union Pacific and MTRLimited

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

The idea behind Union Pacific and MTR Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.