Correlation Between Bt Brands and NORFOLK

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

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

Diversification Opportunities for Bt Brands and NORFOLK

0.47

Correlation Coefficient

Bt Brands  NORFOLK

Very weak diversification

The 3 months correlation between BTBD and NORFOLK is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands 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 Bt Brands 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 Bt Brands 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 Bt Brands i.e., Bt Brands and NORFOLK go up and down completely randomly.

Pair Corralation between Bt Brands and NORFOLK

Given the investment horizon of 90 days Bt Brands is expected to generate 10.19 times more return on investment than NORFOLK. However, Bt Brands is 10.19 times more volatile than NORFOLK SOUTHN P. It trades about 0.0 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.0 per unit of risk. If you would invest  240.00  in Bt Brands on October 4, 2024 and sell it today you would lose (96.00) from holding Bt Brands or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.11%
Values	Daily Returns

Bt Brands  vs.  NORFOLK SOUTHN P

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Bt Brands and NORFOLK

The main advantage of trading using opposite Bt Brands and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bt Brands 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 Bt Brands 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.