Correlation Between Canadian National and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both Canadian National and Norfolk Southern 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 Canadian National and Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian National Railway and Norfolk Southern, you can compare the effects of market volatilities on Canadian National and Norfolk Southern 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 Canadian National with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and Norfolk Southern.
Diversification Opportunities for Canadian National and Norfolk Southern
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Canadian and Norfolk is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and Canadian National 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 Canadian National Railway are associated (or correlated) with Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of Canadian National i.e., Canadian National and Norfolk Southern go up and down completely randomly.
Pair Corralation between Canadian National and Norfolk Southern
Considering the 90-day investment horizon Canadian National Railway is expected to under-perform the Norfolk Southern. But the stock apears to be less risky and, when comparing its historical volatility, Canadian National Railway is 1.55 times less risky than Norfolk Southern. The stock trades about 0.0 of its potential returns per unit of risk. The Norfolk Southern is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 21,330 in Norfolk Southern on August 26, 2024 and sell it today you would earn a total of 5,565 from holding Norfolk Southern or generate 26.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian National Railway vs. Norfolk Southern
Performance |
| Timeline |
| Canadian National Railway |
| Norfolk Southern |
Canadian National and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian National and Norfolk Southern
The main advantage of trading using opposite Canadian National and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, Norfolk Southern 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 Norfolk Southern will offset losses from the drop in Norfolk Southern's long position.| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
| Norfolk Southern vs. Union Pacific | Norfolk Southern vs. Canadian Pacific Railway | Norfolk Southern vs. Canadian National Railway | Norfolk Southern vs. Westinghouse Air Brake |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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