Correlation Between CNA Financial and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both CNA Financial 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 CNA Financial and Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CNA Financial and Norfolk Southern, you can compare the effects of market volatilities on CNA Financial 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 CNA Financial with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNA Financial and Norfolk Southern.
Diversification Opportunities for CNA Financial and Norfolk Southern
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CNA and Norfolk is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and CNA Financial 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 CNA Financial 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 CNA Financial i.e., CNA Financial and Norfolk Southern go up and down completely randomly.
Pair Corralation between CNA Financial and Norfolk Southern
Considering the 90-day investment horizon CNA Financial is expected to generate 0.92 times more return on investment than Norfolk Southern. However, CNA Financial is 1.09 times less risky than Norfolk Southern. It trades about 0.08 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.0 per unit of risk. If you would invest 4,668 in CNA Financial on December 18, 2024 and sell it today you would earn a total of 266.00 from holding CNA Financial or generate 5.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CNA Financial vs. Norfolk Southern
Performance |
Timeline |
CNA Financial |
Norfolk Southern |
CNA Financial and Norfolk Southern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CNA Financial and Norfolk Southern
The main advantage of trading using opposite CNA Financial and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNA Financial 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.CNA Financial vs. Selective Insurance Group | CNA Financial vs. Kemper | CNA Financial vs. Donegal Group B | CNA Financial vs. Argo Group International |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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