Correlation Between Norfolk Southern and Vanguard Funds

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

By analyzing existing cross correlation between Norfolk Southern and Vanguard Funds Public, you can compare the effects of market volatilities on Norfolk Southern and Vanguard Funds 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 Vanguard Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and Vanguard Funds.

Diversification Opportunities for Norfolk Southern and Vanguard Funds

0.7

Correlation Coefficient

Norfolk Southern  Vanguard Funds

Poor diversification

The 3 months correlation between Norfolk and Vanguard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and Vanguard Funds go up and down completely randomly.

Pair Corralation between Norfolk Southern and Vanguard Funds

Assuming the 90 days horizon Norfolk Southern is expected to generate 4.34 times less return on investment than Vanguard Funds. In addition to that, Norfolk Southern is 2.49 times more volatile than Vanguard Funds Public. It trades about 0.02 of its total potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.16 per unit of volatility. If you would invest  9,870  in Vanguard Funds Public on October 5, 2024 and sell it today you would earn a total of  880.00  from holding Vanguard Funds Public or generate 8.92% return on investment over 90 days.

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

Norfolk Southern  vs.  Vanguard Funds Public

Norfolk Southern

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Norfolk Southern has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Norfolk Southern is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Funds Public

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Vanguard Funds may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Norfolk Southern and Vanguard Funds

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

The idea behind Norfolk Southern and Vanguard Funds Public 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 Global Correlations module to find global opportunities by holding instruments from different markets.