Correlation Between Dupont De and NORFOLK

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

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

Diversification Opportunities for Dupont De and NORFOLK

0.62

Correlation Coefficient

Dupont De  NORFOLK

Poor diversification

The 3 months correlation between Dupont and NORFOLK is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and NORFOLK go up and down completely randomly.

Pair Corralation between Dupont De and NORFOLK

Allowing for the 90-day total investment horizon Dupont De is expected to generate 609.44 times less return on investment than NORFOLK. But when comparing it to its historical volatility, Dupont De Nemours is 77.16 times less risky than NORFOLK. It trades about 0.01 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,708  in NORFOLK SOUTHN P on October 11, 2024 and sell it today you would lose (63.00) from holding NORFOLK SOUTHN P or give up 0.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	55.35%
Values	Daily Returns

Dupont De Nemours  vs.  NORFOLK SOUTHN P

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NORFOLK SOUTHN P

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORFOLK SOUTHN P are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and NORFOLK

The main advantage of trading using opposite Dupont De and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.