Correlation Between Norfolk Southern and United Airlines
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and United 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 United 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 United Airlines Holdings, you can compare the effects of market volatilities on Norfolk Southern and United 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and United Airlines.
Diversification Opportunities for Norfolk Southern and United Airlines
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norfolk and United is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and United Airlines go up and down completely randomly.
Pair Corralation between Norfolk Southern and United Airlines
Considering the 90-day investment horizon Norfolk Southern is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Norfolk Southern is 1.65 times less risky than United Airlines. The stock trades about -0.1 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,744 in United Airlines Holdings on November 2, 2024 and sell it today you would earn a total of 1,082 from holding United Airlines Holdings or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. United Airlines Holdings
Performance |
| Timeline |
| Norfolk Southern |
| United Airlines Holdings |
Norfolk Southern and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and United Airlines
The main advantage of trading using opposite Norfolk Southern and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, United 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 United Airlines will offset losses from the drop in United 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 |
| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United Airlines vs. Delta Air Lines |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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