Correlation Between Dave Busters and NORFOLK

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

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

Diversification Opportunities for Dave Busters and NORFOLK

0.51

Correlation Coefficient

Dave Busters  NORFOLK

Very weak diversification

The 3 months correlation between Dave and NORFOLK is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment 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 Dave Busters 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 Dave Busters Entertainment 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 Dave Busters i.e., Dave Busters and NORFOLK go up and down completely randomly.

Pair Corralation between Dave Busters and NORFOLK

Given the investment horizon of 90 days Dave Busters Entertainment is expected to under-perform the NORFOLK. In addition to that, Dave Busters is 7.4 times more volatile than NORFOLK SOUTHN P. It trades about -0.13 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.25 per unit of volatility. If you would invest  9,067  in NORFOLK SOUTHN P on October 11, 2024 and sell it today you would lose (198.00) from holding NORFOLK SOUTHN P or give up 2.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	47.62%
Values	Daily Returns

Dave Busters Entertainment  vs.  NORFOLK SOUTHN P

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dave Busters is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NORFOLK SOUTHN P investors.

Pair Trading with Dave Busters and NORFOLK

The main advantage of trading using opposite Dave Busters and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dave Busters 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 Dave Busters Entertainment 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.