Correlation Between Boeing and NORFOLK

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

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

Diversification Opportunities for Boeing and NORFOLK

-0.3

Correlation Coefficient

Boeing  NORFOLK

Very good diversification

The 3 months correlation between Boeing and NORFOLK is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P and Boeing 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 The Boeing 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 SOUTHN P has no effect on the direction of Boeing i.e., Boeing and NORFOLK go up and down completely randomly.

Pair Corralation between Boeing and NORFOLK

Allowing for the 90-day total investment horizon Boeing is expected to generate 4.06 times less return on investment than NORFOLK. In addition to that, Boeing is 1.82 times more volatile than NORFOLK SOUTHN P. It trades about 0.01 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.09 per unit of volatility. If you would invest  8,526  in NORFOLK SOUTHN P on December 22, 2024 and sell it today you would earn a total of  276.00  from holding NORFOLK SOUTHN P or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

The Boeing  vs.  NORFOLK SOUTHN P

Boeing

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NORFOLK SOUTHN P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NORFOLK SOUTHN P are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, NORFOLK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Boeing and NORFOLK

The main advantage of trading using opposite Boeing and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 The Boeing and NORFOLK SOUTHN P 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.