Correlation Between Trinity Industries and Canadian National
Can any of the company-specific risk be diversified away by investing in both Trinity Industries and Canadian National 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 Trinity Industries and Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trinity Industries and Canadian National Railway, you can compare the effects of market volatilities on Trinity Industries and Canadian National 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 Trinity Industries with a short position of Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trinity Industries and Canadian National.
Diversification Opportunities for Trinity Industries and Canadian National
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Trinity and Canadian is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway and Trinity Industries 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 Trinity Industries are associated (or correlated) with Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of Trinity Industries i.e., Trinity Industries and Canadian National go up and down completely randomly.
Pair Corralation between Trinity Industries and Canadian National
Considering the 90-day investment horizon Trinity Industries is expected to generate 2.18 times more return on investment than Canadian National. However, Trinity Industries is 2.18 times more volatile than Canadian National Railway. It trades about 0.11 of its potential returns per unit of risk. Canadian National Railway is currently generating about 0.01 per unit of risk. If you would invest 3,544 in Trinity Industries on August 26, 2024 and sell it today you would earn a total of 211.00 from holding Trinity Industries or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trinity Industries vs. Canadian National Railway
Performance |
| Timeline |
| Trinity Industries |
| Canadian National Railway |
Trinity Industries and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trinity Industries and Canadian National
The main advantage of trading using opposite Trinity Industries and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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