Correlation Between Cementos Pacasmayo and NORFOLK

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

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

Diversification Opportunities for Cementos Pacasmayo and NORFOLK

0.44

Correlation Coefficient

Cementos Pacasmayo  NORFOLK

Very weak diversification

The 3 months correlation between Cementos and NORFOLK is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA 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 Cementos Pacasmayo 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 Cementos Pacasmayo SAA 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 Cementos Pacasmayo i.e., Cementos Pacasmayo and NORFOLK go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and NORFOLK

Given the investment horizon of 90 days Cementos Pacasmayo is expected to generate 1.0 times less return on investment than NORFOLK. In addition to that, Cementos Pacasmayo is 1.58 times more volatile than NORFOLK SOUTHN P. It trades about 0.02 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  8,451  in NORFOLK SOUTHN P on September 30, 2024 and sell it today you would earn a total of  124.00  from holding NORFOLK SOUTHN P or generate 1.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	50.79%
Values	Daily Returns

Cementos Pacasmayo SAA  vs.  NORFOLK SOUTHN P

Cementos Pacasmayo SAA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the 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 unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for NORFOLK SOUTHN P investors.

Pair Trading with Cementos Pacasmayo and NORFOLK

The main advantage of trading using opposite Cementos Pacasmayo and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cementos Pacasmayo 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 Cementos Pacasmayo SAA 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.