Correlation Between Aterian and Norfolk Southern

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

By analyzing existing cross correlation between Aterian and Norfolk Southern, you can compare the effects of market volatilities on Aterian 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 Aterian with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aterian and Norfolk Southern.

Diversification Opportunities for Aterian and Norfolk Southern

0.39

Correlation Coefficient

Aterian  Norfolk Southern

Weak diversification

The 3 months correlation between Aterian and Norfolk is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aterian and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and Aterian 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 Aterian 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 Aterian i.e., Aterian and Norfolk Southern go up and down completely randomly.

Pair Corralation between Aterian and Norfolk Southern

Given the investment horizon of 90 days Aterian is expected to under-perform the Norfolk Southern. In addition to that, Aterian is 2.86 times more volatile than Norfolk Southern. It trades about -0.1 of its total potential returns per unit of risk. Norfolk Southern is currently generating about -0.27 per unit of volatility. If you would invest  27,167  in Norfolk Southern on October 9, 2024 and sell it today you would lose (3,471) from holding Norfolk Southern or give up 12.78% of portfolio value over 90 days.

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

Aterian  vs.  Norfolk Southern

Aterian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Norfolk Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norfolk Southern has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Norfolk Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aterian and Norfolk Southern

The main advantage of trading using opposite Aterian and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aterian 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.

The idea behind Aterian and Norfolk Southern 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.