Correlation Between TFI International and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both TFI International and Norfolk Southern 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 TFI International and Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFI International and Norfolk Southern, you can compare the effects of market volatilities on TFI International and Norfolk Southern 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 TFI International with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFI International and Norfolk Southern.
Diversification Opportunities for TFI International and Norfolk Southern
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TFI and Norfolk is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and TFI International 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 TFI International are associated (or correlated) with Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of TFI International i.e., TFI International and Norfolk Southern go up and down completely randomly.
Pair Corralation between TFI International and Norfolk Southern
Given the investment horizon of 90 days TFI International is expected to under-perform the Norfolk Southern. But the stock apears to be less risky and, when comparing its historical volatility, TFI International is 1.05 times less risky than Norfolk Southern. The stock trades about -0.17 of its potential returns per unit of risk. The Norfolk Southern is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 27,275 in Norfolk Southern on November 2, 2024 and sell it today you would lose (1,555) from holding Norfolk Southern or give up 5.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFI International vs. Norfolk Southern
Performance |
| Timeline |
| TFI International |
| Norfolk Southern |
TFI International and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFI International and Norfolk Southern
The main advantage of trading using opposite TFI International and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International position performs unexpectedly, Norfolk Southern 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 Norfolk Southern will offset losses from the drop in Norfolk Southern's long position.| TFI International vs. Old Dominion Freight | TFI International vs. ArcBest Corp | TFI International vs. Marten Transport | TFI International vs. Werner Enterprises |
| 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 Positions Ratings module to 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.
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