Correlation Between Canadian National and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Canadian National and Westinghouse Air 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 Westinghouse Air 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 Westinghouse Air Brake, you can compare the effects of market volatilities on Canadian National and Westinghouse Air 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 Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and Westinghouse Air.
Diversification Opportunities for Canadian National and Westinghouse Air
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and Westinghouse is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of Canadian National i.e., Canadian National and Westinghouse Air go up and down completely randomly.
Pair Corralation between Canadian National and Westinghouse Air
Considering the 90-day investment horizon Canadian National Railway is expected to under-perform the Westinghouse Air. But the stock apears to be less risky and, when comparing its historical volatility, Canadian National Railway is 1.03 times less risky than Westinghouse Air. The stock trades about -0.09 of its potential returns per unit of risk. The Westinghouse Air Brake is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 18,952 in Westinghouse Air Brake on August 23, 2024 and sell it today you would earn a total of 851.00 from holding Westinghouse Air Brake or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian National Railway vs. Westinghouse Air Brake
Performance |
| Timeline |
| Canadian National Railway |
| Westinghouse Air Brake |
Canadian National and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian National and Westinghouse Air
The main advantage of trading using opposite Canadian National and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air's long position.| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. Freightcar America | Westinghouse Air vs. CSX Corporation |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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