Correlation Between BANK MANDIRI and Norfolk Southern

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

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

Diversification Opportunities for BANK MANDIRI and Norfolk Southern

-0.51

Correlation Coefficient

BANK MANDIRI  Norfolk Southern

Excellent diversification

The 3 months correlation between BANK and Norfolk is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and BANK MANDIRI 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 BANK MANDIRI 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 BANK MANDIRI i.e., BANK MANDIRI and Norfolk Southern go up and down completely randomly.

Pair Corralation between BANK MANDIRI and Norfolk Southern

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 1.73 times more return on investment than Norfolk Southern. However, BANK MANDIRI is 1.73 times more volatile than Norfolk Southern. It trades about -0.17 of its potential returns per unit of risk. Norfolk Southern is currently generating about -0.44 per unit of risk. If you would invest  35.00  in BANK MANDIRI on September 23, 2024 and sell it today you would lose (3.00) from holding BANK MANDIRI or give up 8.57% of portfolio value over 90 days.

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

BANK MANDIRI  vs.  Norfolk Southern

BANK MANDIRI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK MANDIRI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Norfolk Southern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norfolk Southern are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK MANDIRI and Norfolk Southern

The main advantage of trading using opposite BANK MANDIRI and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK MANDIRI 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 BANK MANDIRI 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.