Correlation Between Nexstar Media and Canadian National

Can any of the company-specific risk be diversified away by investing in both Nexstar Media 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 Nexstar Media and Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nexstar Media Group and Canadian National Railway, you can compare the effects of market volatilities on Nexstar Media 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 Nexstar Media with a short position of Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexstar Media and Canadian National.

Diversification Opportunities for Nexstar Media and Canadian National

-0.69

Correlation Coefficient

Nexstar Media  Canadian National

Excellent diversification

The 3 months correlation between Nexstar and Canadian is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Media Group 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 Nexstar Media 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 Nexstar Media Group 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 Nexstar Media i.e., Nexstar Media and Canadian National go up and down completely randomly.

Pair Corralation between Nexstar Media and Canadian National

Assuming the 90 days horizon Nexstar Media Group is expected to generate 1.68 times more return on investment than Canadian National. However, Nexstar Media is 1.68 times more volatile than Canadian National Railway. It trades about 0.08 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.11 per unit of risk. If you would invest  15,039  in Nexstar Media Group on December 23, 2024 and sell it today you would earn a total of  1,556  from holding Nexstar Media Group or generate 10.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nexstar Media Group  vs.  Canadian National Railway

Nexstar Media Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Media Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nexstar Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Canadian National Railway

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian National Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Nexstar Media and Canadian National

The main advantage of trading using opposite Nexstar Media and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexstar Media 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.

The idea behind Nexstar Media Group and Canadian National Railway 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.