Correlation Between Alphabet and NORFOLK

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

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

Diversification Opportunities for Alphabet and NORFOLK

-0.08

Correlation Coefficient

Alphabet  NORFOLK

Good diversification

The 3 months correlation between Alphabet and NORFOLK is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A 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 Alphabet 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 Alphabet Inc Class A 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 Alphabet i.e., Alphabet and NORFOLK go up and down completely randomly.

Pair Corralation between Alphabet and NORFOLK

Assuming the 90 days horizon Alphabet Inc Class A is expected to under-perform the NORFOLK. In addition to that, Alphabet is 2.27 times more volatile than NORFOLK SOUTHN P. It trades about -0.13 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.04 per unit of volatility. If you would invest  9,752  in NORFOLK SOUTHN P on December 24, 2024 and sell it today you would lose (196.00) from holding NORFOLK SOUTHN P or give up 2.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Alphabet Inc Class A  vs.  NORFOLK SOUTHN P

Alphabet Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NORFOLK SOUTHN P

Risk-Adjusted Performance

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 Alphabet and NORFOLK

The main advantage of trading using opposite Alphabet and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class A 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.