Correlation Between Norfolk Southern and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and Southwest Airlines 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 Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and Southwest Airlines, you can compare the effects of market volatilities on Norfolk Southern and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and Southwest Airlines.
Diversification Opportunities for Norfolk Southern and Southwest Airlines
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norfolk and Southwest is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and Southwest Airlines go up and down completely randomly.
Pair Corralation between Norfolk Southern and Southwest Airlines
Considering the 90-day investment horizon Norfolk Southern is expected to generate 1.07 times less return on investment than Southwest Airlines. In addition to that, Norfolk Southern is 1.45 times more volatile than Southwest Airlines. It trades about 0.15 of its total potential returns per unit of risk. Southwest Airlines is currently generating about 0.23 per unit of volatility. If you would invest 2,943 in Southwest Airlines on August 26, 2024 and sell it today you would earn a total of 254.00 from holding Southwest Airlines or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. Southwest Airlines
Performance |
| Timeline |
| Norfolk Southern |
| Southwest Airlines |
Norfolk Southern and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and Southwest Airlines
The main advantage of trading using opposite Norfolk Southern and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' 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 |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |