Correlation Between Spectrum Brands and NORFOLK

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

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

Diversification Opportunities for Spectrum Brands and NORFOLK

0.31

Correlation Coefficient

Spectrum Brands  NORFOLK

Weak diversification

The 3 months correlation between Spectrum and NORFOLK is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings 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 Spectrum Brands 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 Spectrum Brands Holdings 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 Spectrum Brands i.e., Spectrum Brands and NORFOLK go up and down completely randomly.

Pair Corralation between Spectrum Brands and NORFOLK

Considering the 90-day investment horizon Spectrum Brands Holdings is expected to under-perform the NORFOLK. In addition to that, Spectrum Brands is 1.21 times more volatile than NORFOLK SOUTHN P. It trades about -0.18 of its total potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.08 per unit of volatility. If you would invest  8,526  in NORFOLK SOUTHN P on December 23, 2024 and sell it today you would earn a total of  276.00  from holding NORFOLK SOUTHN P or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.82%
Values	Daily Returns

Spectrum Brands Holdings  vs.  NORFOLK SOUTHN P

Spectrum Brands Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NORFOLK SOUTHN P

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NORFOLK SOUTHN P are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, NORFOLK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Spectrum Brands and NORFOLK

The main advantage of trading using opposite Spectrum Brands and NORFOLK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Brands 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 Spectrum Brands Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.