Correlation Between American Express and NORFOLK

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

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

Diversification Opportunities for American Express and NORFOLK

-0.23

Correlation Coefficient

American Express  NORFOLK

Very good diversification

The 3 months correlation between American and NORFOLK is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding American Express and NORFOLK SOUTHERN PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHERN PORATION and American Express 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 American Express are associated (or correlated) with NORFOLK. 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 PORATION has no effect on the direction of American Express i.e., American Express and NORFOLK go up and down completely randomly.

Pair Corralation between American Express and NORFOLK

Considering the 90-day investment horizon American Express is expected to generate 1.43 times more return on investment than NORFOLK. However, American Express is 1.43 times more volatile than NORFOLK SOUTHERN PORATION. It trades about 0.19 of its potential returns per unit of risk. NORFOLK SOUTHERN PORATION is currently generating about 0.02 per unit of risk. If you would invest  27,083  in American Express on October 26, 2024 and sell it today you would earn a total of  5,504  from holding American Express or generate 20.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.75%
Values	Daily Returns

American Express  vs.  NORFOLK SOUTHERN PORATION

American Express

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

NORFOLK SOUTHERN PORATION

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORFOLK SOUTHERN PORATION are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and NORFOLK

The main advantage of trading using opposite American Express and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, NORFOLK 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 will offset losses from the drop in NORFOLK's long position.

The idea behind American Express and NORFOLK SOUTHERN PORATION 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.