Correlation Between Mattel and NORFOLK

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

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

Diversification Opportunities for Mattel and NORFOLK

-0.75

Correlation Coefficient

Mattel  NORFOLK

Pay attention - limited upside

The 3 months correlation between Mattel and NORFOLK is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc 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 Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and NORFOLK go up and down completely randomly.

Pair Corralation between Mattel and NORFOLK

Considering the 90-day investment horizon Mattel Inc is expected to generate 1.99 times more return on investment than NORFOLK. However, Mattel is 1.99 times more volatile than NORFOLK SOUTHN P. It trades about 0.08 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.03 per unit of risk. If you would invest  1,794  in Mattel Inc on December 24, 2024 and sell it today you would earn a total of  186.00  from holding Mattel Inc or generate 10.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	45.9%
Values	Daily Returns

Mattel Inc  vs.  NORFOLK SOUTHN P

Mattel Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mattel Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Mattel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NORFOLK SOUTHN P

Risk-Adjusted Performance

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 Mattel and NORFOLK

The main advantage of trading using opposite Mattel and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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 Mattel Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.