Correlation Between Honest and NORFOLK

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

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

Diversification Opportunities for Honest and NORFOLK

-0.34

Correlation Coefficient

Honest  NORFOLK

Very good diversification

The 3 months correlation between Honest and NORFOLK is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company 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 Honest 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 Honest Company 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 Honest i.e., Honest and NORFOLK go up and down completely randomly.

Pair Corralation between Honest and NORFOLK

Given the investment horizon of 90 days Honest Company is expected to generate 2.79 times more return on investment than NORFOLK. However, Honest is 2.79 times more volatile than NORFOLK SOUTHN P. It trades about 0.19 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.13 per unit of risk. If you would invest  378.00  in Honest Company on October 26, 2024 and sell it today you would earn a total of  235.00  from holding Honest Company or generate 62.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.33%
Values	Daily Returns

Honest Company  vs.  NORFOLK SOUTHN P

Honest Company

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Honest Company are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Honest unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for NORFOLK SOUTHN P investors.

Pair Trading with Honest and NORFOLK

The main advantage of trading using opposite Honest and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest 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 Honest Company 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.