Correlation Between Carlsburg and Union Pacific

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Can any of the company-specific risk be diversified away by investing in both Carlsburg 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 Carlsburg and Union Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carlsburg As B and Union Pacific Corp, you can compare the effects of market volatilities on Carlsburg 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 Carlsburg with a short position of Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsburg and Union Pacific.

Diversification Opportunities for Carlsburg and Union Pacific

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Carlsburg and Union is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Carlsburg As B and Union Pacific Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific Corp and Carlsburg 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 Carlsburg As B 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 Corp has no effect on the direction of Carlsburg i.e., Carlsburg and Union Pacific go up and down completely randomly.

Pair Corralation between Carlsburg and Union Pacific

Assuming the 90 days horizon Carlsburg is expected to generate 1.08 times less return on investment than Union Pacific. In addition to that, Carlsburg is 1.09 times more volatile than Union Pacific Corp. It trades about 0.22 of its total potential returns per unit of risk. Union Pacific Corp is currently generating about 0.25 per unit of volatility. If you would invest  19,714  in Union Pacific Corp on September 1, 2022 and sell it today you would earn a total of  2,034  from holding Union Pacific Corp or generate 10.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Carlsburg As B  vs.  Union Pacific Corp

 Performance (%) 
       Timeline  
Carlsburg As B 
Carlsburg Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carlsburg As B are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, Carlsburg is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Carlsburg Price Channel

Union Pacific Corp 
Union Performance
0 of 100
Over the last 90 days Union Pacific Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Union Pacific is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

Union Price Channel

Carlsburg and Union Pacific Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carlsburg and Union Pacific

The main advantage of trading using opposite Carlsburg and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlsburg 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.
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The idea behind Carlsburg As B and Union Pacific Corp 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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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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