Correlation Between Brookfield Infrastructure and Norfolk Southern

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Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure 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 Brookfield Infrastructure and Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Infrastructure Partners and Norfolk Southern Corp, you can compare the effects of market volatilities on Brookfield Infrastructure 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 Brookfield Infrastructure with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Norfolk Southern.

Diversification Opportunities for Brookfield Infrastructure and Norfolk Southern

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Brookfield and Norfolk is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Norfolk Southern Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern Corp and Brookfield Infrastructure 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 Brookfield Infrastructure Partners 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 Corp has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Norfolk Southern go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Norfolk Southern

Considering the 90-day investment horizon Brookfield Infrastructure is expected to generate 1.01 times less return on investment than Norfolk Southern. But when comparing it to its historical volatility, Brookfield Infrastructure Partners is 1.28 times less risky than Norfolk Southern. It trades about 0.03 of its potential returns per unit of risk. Norfolk Southern Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  22,833  in Norfolk Southern Corp on September 1, 2022 and sell it today you would earn a total of  2,768  from holding Norfolk Southern Corp or generate 12.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Brookfield Infrastructure Part  vs.  Norfolk Southern Corp

 Performance (%) 
       Timeline  
Brookfield Infrastructure 
Brookfield Performance
0 of 100
Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Brookfield Price Channel

Norfolk Southern Corp 
Norfolk Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Norfolk Southern Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, Norfolk Southern may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Norfolk Price Channel

Brookfield Infrastructure and Norfolk Southern Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brookfield Infrastructure and Norfolk Southern

The main advantage of trading using opposite Brookfield Infrastructure and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure 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.
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The idea behind Brookfield Infrastructure Partners and Norfolk Southern Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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