Correlation Between Healthier Choices and Union Pacific

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

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

Diversification Opportunities for Healthier Choices and Union Pacific

-0.09

Correlation Coefficient

Healthier Choices  Union Pacific

Good diversification

The 3 months correlation between Healthier and Union is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Healthier Choices Management and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific and Healthier Choices 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 Healthier Choices Management 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 Healthier Choices i.e., Healthier Choices and Union Pacific go up and down completely randomly.

Pair Corralation between Healthier Choices and Union Pacific

Given the investment horizon of 90 days Healthier Choices Management is expected to generate 542.6 times more return on investment than Union Pacific. However, Healthier Choices is 542.6 times more volatile than Union Pacific. It trades about 0.43 of its potential returns per unit of risk. Union Pacific is currently generating about -0.4 per unit of risk. If you would invest  0.00  in Healthier Choices Management on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Healthier Choices Management or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Healthier Choices Management  vs.  Union Pacific

Healthier Choices

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Healthier Choices Management are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Healthier Choices exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. 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 Healthier Choices and Union Pacific

The main advantage of trading using opposite Healthier Choices and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthier Choices 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 Healthier Choices Management 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.