Correlation Between Norfolk Southern and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and Honeywell International 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 Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and Honeywell International, you can compare the effects of market volatilities on Norfolk Southern and Honeywell International 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 Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and Honeywell International.
Diversification Opportunities for Norfolk Southern and Honeywell International
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norfolk and Honeywell is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and Honeywell International go up and down completely randomly.
Pair Corralation between Norfolk Southern and Honeywell International
Considering the 90-day investment horizon Norfolk Southern is expected to under-perform the Honeywell International. In addition to that, Norfolk Southern is 1.13 times more volatile than Honeywell International. It trades about -0.09 of its total potential returns per unit of risk. Honeywell International is currently generating about -0.02 per unit of volatility. If you would invest 22,696 in Honeywell International on November 3, 2024 and sell it today you would lose (324.00) from holding Honeywell International or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. Honeywell International
Performance |
| Timeline |
| Norfolk Southern |
| Honeywell International |
Norfolk Southern and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and Honeywell International
The main advantage of trading using opposite Norfolk Southern and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, Honeywell International 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 Honeywell International will offset losses from the drop in Honeywell International'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 |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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