Correlation Between Norfolk Southern and CRRCLimited

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Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and CRRCLimited 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 Norfolk Southern and CRRCLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and CRRC Limited, you can compare the effects of market volatilities on Norfolk Southern and CRRCLimited 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 Norfolk Southern with a short position of CRRCLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and CRRCLimited.

Diversification Opportunities for Norfolk Southern and CRRCLimited

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Norfolk and CRRCLimited is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and CRRC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRRC Limited and Norfolk Southern 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 Norfolk Southern are associated (or correlated) with CRRCLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRRC Limited has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and CRRCLimited go up and down completely randomly.

Pair Corralation between Norfolk Southern and CRRCLimited

Assuming the 90 days horizon Norfolk Southern is expected to generate 0.8 times more return on investment than CRRCLimited. However, Norfolk Southern is 1.24 times less risky than CRRCLimited. It trades about 0.06 of its potential returns per unit of risk. CRRC Limited is currently generating about 0.01 per unit of risk. If you would invest  19,767  in Norfolk Southern on October 2, 2024 and sell it today you would earn a total of  2,833  from holding Norfolk Southern or generate 14.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Norfolk Southern  vs.  CRRC Limited

 Performance 
       Timeline  
Norfolk Southern 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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. Despite nearly stable basic indicators, Norfolk Southern is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
CRRC Limited 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in CRRC Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CRRCLimited is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Norfolk Southern and CRRCLimited Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norfolk Southern and CRRCLimited

The main advantage of trading using opposite Norfolk Southern and CRRCLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, CRRCLimited 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 CRRCLimited will offset losses from the drop in CRRCLimited's long position.
The idea behind Norfolk Southern and CRRC Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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