Correlation Between Trinity Industries and Union Pacific

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

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

Diversification Opportunities for Trinity Industries and Union Pacific

0.1

Correlation Coefficient

Trinity Industries  Union Pacific

Average diversification

The 3 months correlation between Trinity and Union is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific and Trinity Industries 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 Trinity Industries 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 Trinity Industries i.e., Trinity Industries and Union Pacific go up and down completely randomly.

Pair Corralation between Trinity Industries and Union Pacific

Considering the 90-day investment horizon Trinity Industries is expected to under-perform the Union Pacific. In addition to that, Trinity Industries is 1.36 times more volatile than Union Pacific. It trades about -0.24 of its total potential returns per unit of risk. Union Pacific is currently generating about -0.06 per unit of volatility. If you would invest  22,875  in Union Pacific on January 4, 2025 and sell it today you would lose (1,549) from holding Union Pacific or give up 6.77% of portfolio value over 90 days.

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

Trinity Industries  vs.  Union Pacific

Trinity Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trinity Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Union Pacific

Risk-Adjusted Performance

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 Trinity Industries and Union Pacific

The main advantage of trading using opposite Trinity Industries and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries 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 Trinity Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.