Correlation Between Norfolk Southern and 23291KAK1

Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and 23291KAK1 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 23291KAK1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Norfolk Southern and DH EUROPE FINANCE, you can compare the effects of market volatilities on Norfolk Southern and 23291KAK1 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 23291KAK1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and 23291KAK1.

Diversification Opportunities for Norfolk Southern and 23291KAK1

0.13

Correlation Coefficient

Norfolk Southern  23291KAK1

Average diversification

The 3 months correlation between Norfolk and 23291KAK1 is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and DH EUROPE FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DH EUROPE FINANCE 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 23291KAK1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DH EUROPE FINANCE has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and 23291KAK1 go up and down completely randomly.

Pair Corralation between Norfolk Southern and 23291KAK1

Considering the 90-day investment horizon Norfolk Southern is expected to generate 2.09 times less return on investment than 23291KAK1. But when comparing it to its historical volatility, Norfolk Southern is 2.38 times less risky than 23291KAK1. It trades about 0.24 of its potential returns per unit of risk. DH EUROPE FINANCE is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7,102  in DH EUROPE FINANCE on October 23, 2024 and sell it today you would earn a total of  259.00  from holding DH EUROPE FINANCE or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	44.44%
Values	Daily Returns

Norfolk Southern  vs.  DH EUROPE FINANCE

Norfolk Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norfolk Southern has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

DH EUROPE FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DH EUROPE FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 23291KAK1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Norfolk Southern and 23291KAK1

The main advantage of trading using opposite Norfolk Southern and 23291KAK1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, 23291KAK1 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 23291KAK1 will offset losses from the drop in 23291KAK1's long position.

The idea behind Norfolk Southern and DH EUROPE FINANCE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..