Correlation Between Boston Properties and NORFOLK

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

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

Diversification Opportunities for Boston Properties and NORFOLK

-0.67

Correlation Coefficient

Boston Properties  NORFOLK

Excellent diversification

The 3 months correlation between Boston and NORFOLK is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties 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 Boston Properties 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 Boston Properties 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 Boston Properties i.e., Boston Properties and NORFOLK go up and down completely randomly.

Pair Corralation between Boston Properties and NORFOLK

Considering the 90-day investment horizon Boston Properties is expected to under-perform the NORFOLK. In addition to that, Boston Properties is 3.36 times more volatile than NORFOLK SOUTHN P. It trades about -0.06 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.03 per unit of volatility. If you would invest  9,656  in NORFOLK SOUTHN P on December 22, 2024 and sell it today you would earn a total of  42.00  from holding NORFOLK SOUTHN P or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	49.18%
Values	Daily Returns

Boston Properties  vs.  NORFOLK SOUTHN P

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic 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 SOUTHN P

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORFOLK SOUTHN P are ranked lower than 2 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Properties and NORFOLK

The main advantage of trading using opposite Boston Properties and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties 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 Boston Properties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.