Correlation Between Norfolk Southern and Freightcar America
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and Freightcar America 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 Freightcar America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and Freightcar America, you can compare the effects of market volatilities on Norfolk Southern and Freightcar America 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 Freightcar America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and Freightcar America.
Diversification Opportunities for Norfolk Southern and Freightcar America
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norfolk and Freightcar is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and Freightcar America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightcar America 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 Freightcar America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freightcar America has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and Freightcar America go up and down completely randomly.
Pair Corralation between Norfolk Southern and Freightcar America
Considering the 90-day investment horizon Norfolk Southern is expected to generate 0.25 times more return on investment than Freightcar America. However, Norfolk Southern is 4.07 times less risky than Freightcar America. It trades about 0.05 of its potential returns per unit of risk. Freightcar America is currently generating about -0.07 per unit of risk. If you would invest 25,903 in Norfolk Southern on August 23, 2024 and sell it today you would earn a total of 523.00 from holding Norfolk Southern or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. Freightcar America
Performance |
| Timeline |
| Norfolk Southern |
| Freightcar America |
Norfolk Southern and Freightcar America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and Freightcar America
The main advantage of trading using opposite Norfolk Southern and Freightcar America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, Freightcar America 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 Freightcar America will offset losses from the drop in Freightcar America'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 |
| Freightcar America vs. Greenbrier Companies | Freightcar America vs. LB Foster | Freightcar America vs. Westinghouse Air Brake | Freightcar America 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |