Correlation Between Norfolk Southern and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and Alstom SA 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 Norfolk Southern and Alstom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and Alstom SA, you can compare the effects of market volatilities on Norfolk Southern and Alstom SA 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 Norfolk Southern with a short position of Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and Alstom SA.
Diversification Opportunities for Norfolk Southern and Alstom SA
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norfolk and Alstom is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA and Norfolk Southern 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 Norfolk Southern are associated (or correlated) with Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and Alstom SA go up and down completely randomly.
Pair Corralation between Norfolk Southern and Alstom SA
Considering the 90-day investment horizon Norfolk Southern is expected to generate 1.3 times less return on investment than Alstom SA. But when comparing it to its historical volatility, Norfolk Southern is 1.44 times less risky than Alstom SA. It trades about 0.04 of its potential returns per unit of risk. Alstom SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,835 in Alstom SA on November 3, 2024 and sell it today you would earn a total of 143.00 from holding Alstom SA or generate 7.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Norfolk Southern vs. Alstom SA
Performance |
| Timeline |
| Norfolk Southern |
| Alstom SA |
Norfolk Southern and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and Alstom SA
The main advantage of trading using opposite Norfolk Southern and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| Norfolk Southern vs. Union Pacific | Norfolk Southern vs. Canadian Pacific Railway | Norfolk Southern vs. Canadian National Railway | Norfolk Southern vs. Westinghouse Air Brake |
| Alstom SA vs. Westinghouse Air Brake | Alstom SA vs. Canadian Pacific Railway | Alstom SA vs. Trinity Industries | Alstom SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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