Correlation Between MYT Netherlands and Norfolk Southern

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

By analyzing existing cross correlation between MYT Netherlands Parent and Norfolk Southern, you can compare the effects of market volatilities on MYT Netherlands and Norfolk Southern 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 MYT Netherlands with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of MYT Netherlands and Norfolk Southern.

Diversification Opportunities for MYT Netherlands and Norfolk Southern

-0.39

Correlation Coefficient

MYT Netherlands  Norfolk Southern

Very good diversification

The 3 months correlation between MYT and Norfolk is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding MYT Netherlands Parent and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and MYT Netherlands 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 MYT Netherlands Parent are associated (or correlated) with Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of MYT Netherlands i.e., MYT Netherlands and Norfolk Southern go up and down completely randomly.

Pair Corralation between MYT Netherlands and Norfolk Southern

Given the investment horizon of 90 days MYT Netherlands Parent is expected to generate 3.42 times more return on investment than Norfolk Southern. However, MYT Netherlands is 3.42 times more volatile than Norfolk Southern. It trades about 0.02 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.01 per unit of risk. If you would invest  1,141  in MYT Netherlands Parent on October 25, 2024 and sell it today you would lose (214.00) from holding MYT Netherlands Parent or give up 18.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MYT Netherlands Parent  vs.  Norfolk Southern

MYT Netherlands Parent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MYT Netherlands Parent are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, MYT Netherlands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Norfolk Southern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norfolk Southern are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Norfolk Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MYT Netherlands and Norfolk Southern

The main advantage of trading using opposite MYT Netherlands and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYT Netherlands position performs unexpectedly, Norfolk Southern 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 Southern will offset losses from the drop in Norfolk Southern's long position.

The idea behind MYT Netherlands Parent and Norfolk Southern 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.